U.S. Gas Demand Sets Up Largest Pipeline Expansion Since 2008
Rising LNG exports, data center power demand and Permian gas growth are driving the largest U.S. natural gas pipeline expansion since 2008, according to a new Morningstar DBRS analysis.
(P&GJ) — Strong growth in U.S. natural gas demand is driving the largest wave of pipeline construction since the peak of the shale boom in 2008, with nearly 18 billion cubic feet per day of new capacity expected to come online in 2026, according to a new analysis from Morningstar DBRS.
The expansion is being fueled by a combination of rising LNG exports, growing power demand from data centers and manufacturing, and surging associated gas production in the Permian Basin, where pipeline takeaway constraints have pushed regional prices sharply lower.
Morningstar DBRS estimates that 12 major new and expanded pipeline projects across Texas, Louisiana and Oklahoma will be completed next year, representing the largest annual capacity addition in nearly two decades. The combined capacity exceeds total daily natural gas consumption in Canada.
A key driver behind the build-out is severely depressed pricing at the Waha Hub in West Texas. Spot prices at Waha turned negative for extended periods in 2025 as associated gas production outpaced available takeaway capacity, forcing producers to sell gas at steep discounts or pay to move volumes out of the basin.
“The [Permian] industry still relies on pipeline egress to market the gas and when in-region demand drops, there historically has been excess supply,” Texas Oil & Gas Association Chief Economist Dean Foreman said, according to the report.
Unlike past cycles, Morningstar DBRS noted that today’s pipeline expansion is increasingly being driven by demand-side players rather than producers alone. LNG exporters, utilities and large industrial power users are helping anchor new projects by committing to long-term firm transportation to secure discounted gas supply.
Associated gas production in the Permian has grown at a compound annual rate of 20% between 2014 and 2024, reaching 12.5 billion cubic feet per day last year, according to U.S. Energy Information Administration data cited in the report. While growth is expected to moderate, production is still projected to rise alongside crude output.
The analysis also points to a more favorable U.S. regulatory environment as a catalyst. Recent permitting reforms and accelerated review timelines under the National Environmental Policy Act have reduced regulatory risk and improved project economics for midstream developers.
Major midstream operators are positioning their capital programs accordingly. Morningstar DBRS highlighted increased investment in natural gas infrastructure by Enbridge, TC Energy and Kinder Morgan, with pipeline projects backed by long-term contracts and brownfield expansions viewed as credit-neutral to modestly positive.
Looking beyond 2026, the firm expects pipeline investment to remain elevated if LNG export growth and power demand from data centers continue at current levels, reinforcing the long-term role of natural gas in U.S. energy markets.