Over the past several months, one of the most dominant stories in energy has been the need for more pipeline capacity to bring oil, natural gas and natural gas liquids to markets.
A few weeks ago, I wrote about how a lack of natural gas takeaway capacity in the Permian Basin could shut in future oil production.
The situation remains serious and is not relegated to the Permian. When it comes to natural gas, the problem is widespread, impacting gas from the Rockies, Midcontinent, the Bakken, Marcellus, Haynesville and Eagle Ford.
The U.S. is producing an enormous amount of natural gas that the world can consume through expanded export of liquefied natural gas (LNG), chemicals, petrochemicals and refined products.
But our lack of pipeline capacity is keeping much of it constrained or stranded. Regulations limiting the amount of natural gas that can be flared are putting further pressure on producers, who, in many cases, are producing more associated gas from increased oil production. All of this puts downward pressure on prices.
Nowhere is this pipeline issue more serious than in the Rocky Mountain region. The Rockies have always had challenges with gas transportation. Over the years pipelines have been built to move gas eastward and to some extent, westward. With so much gas coming west from the Marcellus in the northeast, plus Canadian gas pushing south and the challenge of takeaway capacity from the Permian, Rockies gas producers find themselves with serious challenges in terms of finding markets. Much of the natural gas produced in the region is on federal lands where permitting processes and operations can be slower and more onerous.
The states of Colorado and Utah, facing the economic impacts of having gas stranded on the western slope in Colorado and the eastern counties of Utah, have taken a unique approach to find markets for the region’s gas. The Colorado Office of Energy and the Utah Office of Energy Development have partnered with Colorado Mesa University’s Unconventional Energy Center to commission Consumer Energy Alliance and RPSEA to complete a report that outlines the region’s gas resources and potential, outlines current constraints to getting that gas to market and focuses on pipeline transportation and global market solutions, including West Coast LNG export to Asia.
This report is also supported financially by Garfield County, Colo., and Duchesne and Uintah counties, in Utah. The group recognized that a common approach toward developing markets for natural gas from the Piceance and Uintah basins would strengthen and benefit the rural economies of both states. The two energy offices signed a memorandum of understanding to formal the new collaboration under the title, “Western States Rural Natural Gas Initiative” (WSRNGI). A report is due out late this summer and both states are interested in bringing other western states, communities and stakeholders into the initiative, which seeks infrastructure development and new gas markets globally.
This creative, collaborative and bi-partisan effort among states and local governments in the Rockies’ producing areas is critical to addressing regional energy challenges. It is also something we need more of. To develop markets and promote rural prosperity, energy producers and transporters need to work together to make the geopolitical, policy, economic and societal cases for developing, transporting and exporting rural natural gas resources.
Colorado and Utah are developing a joint political, policy and advocacy strategy that utilizes, at its core, the basis for the initiative, world-class natural gas resources of both states. This kind of collaborative effort, in the Rockies and elsewhere, could go a long way to meet those challenges and keep the energy revolution going.
Jack Belcher is executive vice president for HBW Resources and consults energy and transportation clients on government relations, regulatory affairs, situational risk management, coalition building and stakeholder relations. He is also Managing Director of the National Ocean Policy Coalition.
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