A plumber can’t fix these clogs.
Booming natural gas production in the Northeast has far outpaced pipeline construction, the U.S. Energy Information Administration says, causing a backlog that’s pushed the region’s gas prices especially low.
Over the winter, "spot prices" – the prices for gas that's available for delivery through the next trading day – from one of the region’s main hubs in central Pennsylvania averaged about $3.55 MMBtu, $1.08 less than the average spot price at every other major U.S. natural gas hub.
“The spread between those prices is a signal to producers as well as midstream operators that that gas is in higher demand elsewhere,” EIA industrial economist Michael Ford says. That in turn “encourages investment in projects that would get more gas to them" – namely, new pipelines.
The Transcontinental Gas Pipe Line Company, or Transco, recently completed a new pipeline to carry gas north to New York and New England, and other projects are in the works: a proposed 106-mile pipeline extension in Georgia, and proposals to reverse the flow of certain pipelines that have historically sent gas from the Gulf Coast to the Northeast.
That “increased availability of [gas] supply" – courtesy of both the new pipelines and the reversed flow of gas in others – "all else being held equal, will have a downward pressure on prices,” Ford says, especially for power plants and large industrial facilities that buy their gas from the spot market, rather than through firm contracts with other gas providers.
Whether the backlog will be completely eliminated remains to be seen: With pipelines already at full capacity, another 1,300 wells have been drilled in the Marcellus Shale but not completed, the EIA said, citing a Feb. 28 report by Barclays.
“You could say that to some degree, the backlog gets relieved with more capacity to move more gas out of Marcellus,” Ford explains. “That would certainly be true. It’s also important to keep in mind that production would increase, which might remove that effect.”