The LDC remains the backbone of the nation’s natural gas distribution network. Natural gas utilities serve more than 71 million residential, commercial and industrial customers across the nation that is delivered through a 2.4-million-mile underground delivery system with an outstanding safety record.
The distribution network also includes measurement and pressure regulators, corrosion control equipment, and valves and meters, all of which must be operated, maintained and upgraded by the local natural gas utility.
The more than 1,200 local natural gas utilities in the United States spend billions of dollars per year on safety programs to ensure the safety and reliability of the many miles of mains and service pipelines that are made up of steel, cast iron or copper, which are subject to corrosion.
Cast iron pipe, which exhibits brittle characteristics and is subject to cracking and breakage, sometimes as a result of ground movement in proximity to buried pipe, has been on the decline since the mid-1980s.
According to a recent American Gas Association (AGA) study, there has been a 46% decrease in the amount of cast iron main since 1985, and only 3% of the entire national gas distribution system is composed of cast iron mains – a figure that is continuously being reduced as pipeline operators implement accelerated pipeline replacement programs. And serious incidents involving cast iron mains have also declined – dropping by a difference of 86% between 1985 and 2012.
The LDC employs many techniques to reduce steel corrosion, including various pipe coatings and the replacement of leak-prone mains and service lines with medium- and high-density polyethylene (PE) plastic pipe that is the current industry standard for most distribution pipe sizes.
In the past decade, natural gas utilities have installed updated plastic lines at a rate of 30,000 miles per year, connecting new customers or replacing older pipeline infrastructure. Today, there are nearly 1.3 million miles of plastic pipe in the natural gas system, along with more than 1.1 million miles of cathodically protected steel pipeline.
Moreover, while LDCs have made significant advances in modernizing pipeline infrastructure over the last two decades, industry estimates indicate it may easily take another three decades of effort to finish the job at the current pace of replacement.
The National Association of Corrosion Engineers (NACE) estimates the direct cost of corrosion for the natural gas distribution industry to be $5 billion annually.
Pipe Replacement And Upgrades
Natural gas utilities spend $7 billion annually on their gas pipeline pipeline systems. Atmos Energy Corporation, one of the nation’s largest natural gas distributors, has invested more than $1.2 billion over the past three years to safeguard the communities it serves. In addition, the company is expected to spend more than $500 million on safety and reliability in fiscal 2013.
In addition to modernizing its pipeline system, Atmos Energy maintains and monitors more than 72,000 miles of pipeline in eight states. For both its distribution and transmission pipelines, it has detailed integrity management programs that require periodic inspections and testing of its lines and equipment. Atmos Energy technicians monitor the company’s pipelines through aerial surveys, on foot patrols and by using specially equipped vehicles to detect natural gas. Atmos has pipeline control centers in Dallas, TX and Franklin, TN that rely on advanced telecommunications technology, flow sensors and remote-control valves to control the system and protect the public.
Xcel Energy announced a pipeline construction replacement projects earlier this year. The company’s work in Fort Collins and Loveland, CO involved the replacement of approximately 16 miles of natural gas pipeline to improve service reliability and help Xcel continue to safely maintain its natural gas systems in Northern Colorado. The project is part of a multi-year program, with total investment of $140 million, in which Xcel Energy is installing or replacing approximately 77 miles of natural gas transmission pipeline in Larimer, Weld and Boulder counties. The project will include some distribution pipeline work and is expected to be completed by the end of 2016.
Moreover, while LDCs have made significant advances in modernizing and upgrading pipeline infrastructure over the last two decades, industry estimates indicate it may easily take another three decades of effort to finish the job at the current pace of replacement.
Gas Prices, Consumption
Natural gas spot prices averaged $3.68 per MMBtu at Henry Hub in October, up 6 cents from the previous month’s price, according to the federal Energy Information Administration’s (EIA) November 2013 Short Term Energy Outlook. The report said while prices declined from April through August, they began increasing in September in anticipation of winter heating demand.
EIA expects the Henry Hub price will increase from an average of $2.75 per MMBtu in 2012 to $3.68 per MMBtu in 2013 and $3.84 per MMBtu in 2014.
The EIA’s natural gas futures prices for February 2014 delivery (for the five-day period ending Nov. 7) averaged $3.57 per MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for February 2014 contracts at $2.70 per MMBtu and $4.73 per MMBtu, respectively. At this time a year ago, the natural gas futures contract for February 2013 averaged $3.86 per MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $2.76 per MMBtu and $5.39 per MMBtu.
As to consumption, the EIA expects that natural gas consumption, which averaged 69.7 Bcf/d in 2012, will average 70.0 Bcf/d and 69.4 Bcf/d in 2013 and 2014, respectively. Colder winter temperatures in 2013 and 2014 (compared with the record-warm temperatures in 2012) are expected to increase the amount of natural gas used for residential and commercial space heating. However, the projected year-over-year increases in natural gas prices contribute to declines in natural gas used for electric power generation from 25.0 Bcf/d in 2012 to 22.1 Bcf/d in 2013 and 21.6 Bcf/d in 2014.
LDCs rely on a host of safety systems, including supervisory control and data acquisition (SCADA) systems, to ensure efficient and effective service at all times. These systems can integrate gas flow control and measurement with other accounting, billing and contract systems to provide a comprehensive measurement and control system for the local gas utility. This allows accurate, timely information on the status of the distribution network to be used by the utility, to ensure efficient and effective service at all times.
The LDC also relies on sophisticated leak detection equipment and odorants to make it easier to detect a leak.
Certainly the nationwide “call-before-you-dig” phone number of “811” (adopted in 2008) has proved to be an essential tool by providing customers, contractors and excavators with a single phone number to call before beginning excavation or construction, to ensure that pipelines and other buried facilities are not damaged.
These are but a few of the safety measures maintained by local distribution companies.
Continued efforts to upgrade and modernize the natural gas pipeline network show a declining trend for natural gas emissions. According to EPA data, less than 1.5% of natural gas is emitted as it travels from where it is produced to homes and businesses. Of that, only 0.3% is emitted from systems operated by local natural gas utilities. Distribution system emissions have reportedly dropped 16% since 1990, even as the industry added nearly 300,000 miles of distribution mains to serve 17 million more customers – an increase of 30% in both cases.
The emissions issue was also on the mind of President Obama when he visited Georgetown University earlier this year to deliver a speech on climate change.
Noting the controversy over the Keystone Pipeline that would carry oil from Canadian oil sand down to refineries in the Gulf, the president said the net effects of the proposed pipeline’s impact on the nation’s climate will be absolutely critical to determining whether this project is allowed to go forward.
On a more positive note for natural gas, he said, “Now, even as we’re producing more domestic oil, we’re also producing more cleaner-burning natural gas than any other country on earth. And, again, sometimes there are disputes about natural gas, but let me say this: We should strengthen our position as the top natural gas producer because, in the medium term at least, it not only can provide safe, cheap power, but it can also help reduce our carbon emissions.
“Federally supported technology has helped our businesses drill more effectively and extract more gas. And now, we’ll keep working with the industry to make drilling safer and cleaner, to make sure that we’re not seeing methane emissions, and to put people to work modernizing our natural gas infrastructure so that we can power more homes and businesses with cleaner energy.
“The bottom line is natural gas is creating jobs. It’s lowering many families’ heat and power bills. And it’s the transition fuel that can power our economy with less carbon pollution, even as our businesses work to develop and then deploy more of the technology required for the even cleaner energy economy of the future.
“And that brings me to the second way that we’re going to reduce carbon pollution – by using more clean energy,” he said.
American Gas Association, Managing the Nation’s Cast Iron Inventory, 2013.
American Gas Foundation, Distribution Infrastructure: Pipeline Replacement and Upgrades, 2012
U.S. Energy Information Administration, Annual Energy Outlook 2013.
U.S. Energy Information Administration, U.S. Natural Gas Production and Trade, 2013.