New Governor, Same New York: Restricting Access to Natural Gas Leads to More Supply Constraints
- Jan 17, 2022 3:09 pm GMT
For years, elected leaders and regulators in New York State and New York City have worked tirelessly to undermine the role of natural gas in the energy sector.
In 2014, former Gov. Andrew Cuomo banned fracking and in the years since, his administration repeatedly blocked the construction of new natural gas pipelines, including using Section 401 of the Clean Water Act to stop construction of the Constitution and North Access Pipelines.
In 2019, major utilities in the state were forced to issue moratoriums on new natural gas hook-ups as a result of the constrained supply. In fact, West Chester County is actually still under a moratorium imposed by utility Con Edison until at least 2023.
Notably, the story hasn’t changed under the state’s new leadership. Gov. Kathy Hochul is overseeing state regulatory agencies that continue to stand in the way of the development of new natural gas infrastructure.
In fact, in a twist of déjà vu that should come as a surprise no one, utility National Grid recently warned that it may once again need to halt new natural gas hookups because it won’t be able to secure enough supply to meet customer demand due to the delay of permit approvals for new pipeline infrastructure.
S&P Global Platts reports:
“The National Grid PLC subsidiary said there is a high likelihood that federal and state permits will not be issued in time to start construction on critical gas capacity programs and avoid a supply-demand imbalance by winter 2023-2024. Additionally, inflation, supply chain problems, and inadequate market resources are placing massively ambitious demand-side management efforts in jeopardy, the company said in a Dec. 29, 2021, filing.
“The issues in part stem from a previous New York State Department of Environmental Conservation decision refusing to issue a critical permit for National Grid’s preferred option for increasing supply: an expansion of the Transcontinental Gas Pipe Line Co. LLC system. The project, known as the Northeast Supply Enhancement project, would be capable of delivering 400,000 Dth/day of gas into New York City and Long Island.” (emphasis added)
Necessary Natural Gas Supplies Held Hostage
This isn’t the first time that New Yorkers have faced a potential moratorium on new natural gas hookups. In fact, two of the state’s major utilities issued moratoriums in 2019 because of inadequate pipeline capacity needed to service new customers.
Then-Gov. Cuomo responded to the halts on new hookups for new customers and existing suspended customers, not by pledging to increase capacity, but by threating the National Grid’s license to operate in the downstate regions. His solution to having adequate supply:
“Gas can be trucked, shipped, or barged, and other infrastructure could be proposed, or additional unloading facilities installed.”
The utility complied with lifting its moratorium, but National Grid warned in 2020 that it may again “have to restrict new gas customer connections,” if the state didn’t allow the construction and expansion of pipelines to bring in natural gas from nearby shale plays. At the time, the utility explained that demand for natural gas in the region has increased by 2.4 percent annually since 2010, placing significant constraints on the utility’s ability to serve:
“Quite simply, we are at risk of not having enough gas to meet the needs of our customers during periods of peak demand on cold winter days.”
Now the utilities are recognizing that without any certainty over the state of proposed additional pipeline capacity, they are going to have to look at alternative, potentially less reliable and more costly means of getting the needed supply to service their customers. According to S&P Global Platts:
“National Grid sees less permitting risk in its effort to increase truck and trailer delivery of compressed natural gas.”
Meanwhile, New Yorkers, who are already paying high prices for electricity and natural gas, could expect natural gas prices to increase another 10 percent because of “accelerating electrification.” New York City recently passed a ban on natural gas for new buildings and Hochul gave support for a statewide ban. It seems New York’s political machine wants to leave their citizens out in the cold.
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