December 2024, Vol. 251, No. 12
Features
‘Skyrocketing’ Costs Loom Large for Urban Infrastructure Construction
By Richard Nemec, Contributing Editor, North America
(P&GJ) – When the National Association of Regulatory Utility Commissioners (NARUC) held its 2024 annual meeting in Anaheim, California, in November it extended operations for an ongoing task force studying ways to better integrate regulations for natural gas and electricity delivery systems.

It also called for the formation of a “gas readiness forum” to help ensure future enhancement of the gas reliability value chain in the midst of global and national initiatives for decarbonization.
It was clear by the comments from NARUC and gas industry leaders that the effort aims to assure continued reliability of the nation’s natural gas pipeline system in the face of growing calls for de-emphasis of fossil fuels to slow down the onset of climate change.
The state regulators’ association clearly is recognizing that there is a growing need for utility operators to reassess the future of their multi-billion-dollar investments in pipes and related equipment. And perhaps nowhere is the focus on this issue more intense than in densely populated urban centers of the United States.
In a national survey showing current U.S. utility rates skyrocketing, particularly in the most heavily populated areas such as California, New York and Massachusetts, a large part of the rising costs is attributable to today’s need for ever-more sophisticated technology to handle installation, operations and maintenance of the urban gas and electric systems, according to the National Center for Construction Education and Research. In addition, the payroll for the skilled workers needed to manage these systems also contributes to the high costs.
And the push to respond to climate change pressures for more decarbonization further drives up costs in the field – in this case urban centers – as captured in a white paper done last May by the Rocky Mountain Institute (RMI) and the Northeast gas/electric utility National Grid. Their research paper outlines “non-pipeline alternatives (NPA) as an emerging option for natural gas systems. RMI and National Grid advocate that operators recognize the interdependence of modern energy delivery systems.
“This serves to advance net-zero [carbon] goals most cost-effectively and equitably, while ensuring the safety and reliability of the [pipeline] systems that customers rely on,” the white paper notes. “NPAs are an emerging area of opportunity for gas system decarbonization in the United States, with the potential to achieve ratepayer savings across separate categories of capital investment.”
The report goes on to apply this potential to infrastructure replacement, capacity expansion, and system extension projects. Thus, future traditional pipeline work, particularly in urban areas, is not likely to be like anything from the past.
The white paper discusses nine case studies on the state of NPAs and integrated resource planning among U.S. and European utilities. Those include 88 NPA projects by San Francisco-based Pacific Gas and Electric Co. (PG&E) that converted 105 of its combination customers off of natural gas without any major infrastructure work.
In Europe various local governments are undertaking what they call “clean heat planning,” again, moving away from gas through neighborhood “decommissioning” of the gas systems, particularly in Switzerland.
PG&E, one of the nation’s largest private sector combination utilities, sees transmission infrastructure work growing a little and distribution work staying at current levels in the next two years, but longer-term plans call for infrastructure work on distribution pipes decreasing in response to growing decarbonization pressures.
For 2025 and 2026 the San Francisco-based large utility plans to replace up to 100 miles of distribution pipelines, both vintage plastic (pre-1985) and vintage steel (pre-19410. PG&E’s investment in transmission pipelines should stay “consistent” over the next five years, and vintage pipeline replacements will be steady over the next two years, utility spokesperson Jason King told P&GJ.
“I see a slight increase in gas transmission capital investment as we work to reduce expense expenditures and address significant electric demands at specific locations,” King said. “Levels of gas distribution capital investment is forecast to remain stable in 2025 and 2026. As decarbonization policies and regulations mature, decarbonization opportunities will increase and gas distribution capital will be associated with retirement and deactivation of existing gas distribution assets, with decarbonization projects in lieu of large capital gas distribution replacement projects.”
King made clear that while the transmission infrastructure should see little immediate impact from the growing calls for de-emphasizing fossil fuels, the push for zero carbon emissions will bring “throughput declines for the remainder of this decade with accelerating levels of declines as we get into the 2030s.”
In the United States and Canada, combination utilities are merging planning efforts more for gas and electricity, and that is bound to impact capital spending for the future.
“An early example of cross-utility planning can be found in Quebec where the gas and electric utilities have received regulatory approval for a joint decarbonization strategy that accounts for the benefits that each system provides the other,” the white paper notes.
Nevertheless, the RMI/National Grid authors acknowledge that 100% voluntary electrification has yet to take place anywhere in the United States. Under existing regulatory provisions, NPAs that avoid infrastructure replacement require a lot of voluntary and coordinated conversions by 100% of a customer segment population from gas to all-electric equipment.
“To date, no U.S. utility has successfully completed this type of NPA,” the report notes. The measurement so far is that the only NPAs reaching 100% electrification only involve groups of four customers or fewer.
Pundits on some of the municipal websites, such as “SmartCitiesDive,” are examining the question of how cities can build a future with fewer gas pipelines in light of the stepped-up local government efforts to push decarbonization policies.
“Some communities and utilities are questioning if expanding their gas systems is the wisest investment,” SmartCities Editor Ysabelle Kempe wrote in a May 2024 opinion column. “That question has led early movers to examine alternatives to gas pipeline construction or upgrades.”
In the past five years since the advent of local moratoriums on new natural gas connections, there has been a steady push back by both the courts and state governments. As a result, in 2024 a majority of states had passed fuel choice laws for consumers when Nebraska in April became the 26th state to pass such legislation on a bipartisan basis.
American Gas Association (AGA) CEO Karen Harbert notes that households using gas for space and water heating, cooking, and clothes drying produce about 18% fewer CO2 emissions than all-electric users.
At the same time, in mid-November 2024, California regulators took initial steps to establish a regulatory process for eventually closing the state’s largest underground natural gas storage facility, Southern California Gas Co.’s (SoCalGas) one-time 100-Bcf capacity Aliso Canyon storage facility north of Los Angeles. Statewide demand for natural gas has been declining annually, causing the California Public Utilities Commission (CPUC) to call for biennial assessments for setting Aliso Canyon’s seasonal capacity in conjunction with a combination of state and local utility sources.
Of note, in 2024 a federal court overturned one of the nation’s earliest local bans on natural gas hookups in new construction in Berkeley, California. Subsequently, the city has repealed the local policy toward gas connections.
In addition, in the November 2024 elections, a citywide ballot measure (GG) to tax property owners of large buildings that rely on natural gas for heating, cooking and other uses was defeated by local voters in Berkeley. Backed by the city’s climate change commissioner, the measure would have imposed a tax on most buildings 15,000 square feet or larger that use natural gas. It was viewed by local advocates as a “more pragmatic” alternative to the city’s first-in-the-nation ban on natural gas hookups.
SoCalGas’ storage field was the site of a spectacular four-month leak at one of its storage wells that lasted from late October 2015 to mid-February 2016. It stirred considerable regulatory and political interest in California and nationally, resulting in the sprawling field on the edges of suburban sprawl being restricted in its overall capacity when it eventually resumed operations. Most recently the CPUC set its capacity limit at 68.6 Bcf, compared to 86 Bcf before the leak.
Oil and gas companies, utilities, and regulators alike recognize the world is in the early stages of some profound transformation away from a carbon-based society. With billions of dollars invested .in energy delivery infrastructure part of the complexity is determining how to continue to rely on this infrastructure and enhance its smart use into the distant future. This is a conundrum that neither private nor public sectors can resolve unilaterally, so collaboration is being loudly touted among corporate, nonprofits and government organizations.

NARUC, AGA and the national associations individual member regulatory bodies and distribution utility companies are supportive of strategic additions and upgrades to the national energy distribution and transmission networks. The regulators have focused on adequate cost recovery for utility infrastructure projects.
NARUC has an ongoing cooperative agreement with U.S. Department of Energy’s (DOE) office of fossil fuel energy that is designed to keep state regulators up-to-date on the gas side of the energy equation, according to Kiera Zitelman, technical director for NARUC’s Center for Partnerships and Innovation.
The regulators have guidance from a joint handbook on infrastructure replacement and modernization developed between the federal government and NARUC four years ago. It details state-by-state and by rate recovery mechanisms in place the regulatory mechanisms to allow gas utilities to recover investments in system modernization work.
Federal statistics on remaining cast iron and bare steel pipelines have been closely examined, Zitelman said. “We’ve looked over the various programs that state regulators have put in place to allow utilities to recover those investments for replacing the old pipelines,” she told P&GJ. She cites the Illinois Commerce Commission (ICC) as one that has focused strongly on replacing the old pipes, particularly in Chicago.
“The handbook is designed to assist regulators by summarizing the landscape for natural gas modernization and, in so doing, analyze various state approaches to prioritization, financing and execution of gas upgrades,” according to Diane Burman, a New York state regulator and the chair of DOE-NARUC Natural Gas Infrastructure Modernization Partnership, which was created under the premise that natural gas is an “essential” U.S. fuel, a proposition that is not shared among all Americans these days.
The United States has a vast natural gas pipeline system, which historically has quickly and economically distributed natural gas to and from almost any location in the lower 48 states. Gas is distributed using 305,000 miles of transmission pipelines), while an additional 2.2 million miles of distribution pipes transport gas within utility service areas.
The distribution system also includes thousands of delivery, receipt, and interconnection points; hundreds of storage facilities; and approximately 50 points for exporting and importing natural gas. DOE maintains a gas distribution center that tracks the system nationally.
Since 2016, Chicago-based Peoples Gas Co. has launched an aggressive multi-year effort to replace and upgrade over 3,000 miles of natural gas pipelines in Chicago and western Pennsylvania. These pipeline replacement projects are part of its Long-Term Infrastructure Improvement Plan (LTIIP) to improve both the safety and the sustainability of People’s natural gas distribution system. NARUC regulators continue to stress that safety is one of three primary focuses of state regulation with the others two being reliability and affordability.
Also in the upper Midwest, DTE Energy maintains that its ongoing gas infrastructure replacement is bringing more safety and reliability to its Detroit energy customers. According to the Detroit-based utility holding company, DTE Gas urban field crews are replacing more than 200 miles of cast iron and steel gas main annually throughout Michigan with longer-lasting, more efficient polyethylene (plastic) pipes. In Detroit alone, crews replaced 136 miles of pipes in 2023 and are on track to complete another 97 miles in 2024.
Along with enlightened regulation and committed capital investment from energy utilities, technology is the “secret sauce” needed to drive the transformation that climate change demands, and industry research organizations such as the Illinois-based GTI Energy are attempting to stay on the front lines of this war-like effort.
Dennis Jarnecke, GTI Energy’s senior director for research and development, is keeping tabs on what is being developed to make urban pipeline infrastructure work more carbon-free, safer and hopefully more cost-effective.
Cost continues to be a big issue when it comes down to urban infrastructure. “The cost has been skyrocketing,” Jarnecke said. “It is all underground so the cost to install and maintain utility piping is rising due to excavation and restoration costs.”
GTI Energy has been deeply involved with long-term efforts that have helped define trenchless technology for use in urban areas. Researchers have been working with utilities and manufacturers to develop minimally invasive technology to reduce third-party damage for decades, exploring different technologies to outfit directional drilling equipment with sensors that look ahead and on the sides of the drilling path.
Jarnecke refers to the latest solution, “Optimal Radar to Find Every Utility in the Streets,” or ORFEUS, as the Holy Grail. “The safe, cost-effective ‘look-ahead’ obstacle detection system for horizontal directional drilling equipment will notify the drilling operator ahead of time if there are unforeseen obstacles in the way,” he said.
The system was developed in Europe and brought to the U.S. by Operations Technology Development (OTD) and GTI Energy for on-site testing to evaluate it for North American markets. Following successful field demonstrations, an agreement with European partners was signed. The Pipeline and Hazardous Materials Safety Administration (PHMSA) provided funding to enhance system functionality and move the technology toward commercialization in the U.S. marketplace.
Tracto-Technik GmbH & Co. KG, Lennestadt, Germany, the lead manufacturer, will bring the technology to market in the U.S. “Some developmental work is still ongoing with the artificial intelligence (AI) part of it,” Jarnecke said. “There is a whole learning component. Now it is a matter of the software learning more about the potential underground obstacles. We have rocks or other obstacles and the system must be refined to be able to differentiate to minimize the amounts of false positives detected,” he said.
“This is interesting and break-through technology,” he said. “Horizontal, directional drilling in an urban environment is very challenging. This technology enables more use of horizontal drilling, not just in urban areas, but overall.” Jarnecke outlines a whole series of GTI Energy projects that relate to pipeline work in populated urban centers where flaring or large emissions of gas can be unnerving to city centers.
One focus area centers on what Jarnecke calls “purposeful emissions,” ones precipitated through operations and maintenance work. Besides the climate change negative effect, these emissions can cause concerns among urban residents and businesses.
In addition to the “fugitive leaks” that garner the most attention from industry and climate change advocates supporting an energy future without fossil fuels, GTI’s Jarnecke is also concerned about these other purposeful leaks. Those include the methane released into the atmosphere when pipes are taken out of service or first put into service.
“The purging of pipes is really the actions taken to replace one gas with another gas,” he said. Natural gas from the pipeline is allowed to emit into the atmosphere and air is then pushed through the pipe to force the rest of the gas out. “Eventually air cannot be mixed with the natural gas in the remaining pipeline, so it has to be removed as the gas is injected.”
The Advanced Research Projects Agency-Energy (ARPA-E) in DOE fosters high-potential, high-impact energy technologies that are too early in their development to attract private-sector investment, Jarnecke said.
“An enclosed flame technology came out of the ARPA-E program and GTI Energy is investigating this technology to see if it has applicability for the natural gas industry as an alternative means of flaring natural gas during blow down operations,” Jarnecke also cites cross-compression as something that is gaining a lot of attention.
Here compressors are used to recompress gas back into the pipeline downstream of the point where the work is being performed. Instead of being vented to the atmosphere, the gas goes back into the pipeline downstream of where it is being worked on, into another pipe or a storage trailer, he said.
Vacuum purging is yet another option for eliminating methane emissions during purging pipelines. “This applies when purging a new pipeline into service,” Jarnecke said. The new pipe or recently repaired pipe is filled with air or nitrogen in order to conduct a leak test. However, in order to purge the pipe into service, operators use natural gas to push the air or nitrogen remaining in the section of new pipe out to the atmosphere.
This avoids dangerous air pockets or a gas/air mixture in the pipe. By using the vacuum purging system, the air or nitrogen is first sucked out of the section of pipe that will be energized. Therefore, when the natural gas is injected into the pipeline there is no need to vent the gas-air mixture into the atmosphere.
Jarnecke said the vacuum technology is expected to be commercially available in 2025. “We envision that all purging of pipes into service will be handled in this way in the future,” he said. “Eliminating methane emissions this way is actually more efficient than the traditional venting.”
Jarnecke also cites “split and pull” technology putting replacement pipes inside old ones in urban areas. While this technology is not widely used, Jarnecke notes that it is being used by select natural gas system operators to replace vintage plastic pipe with new plastic pipe. This method (and equipment) allows operators to replace its vintage plastic pipe and greatly reduce the amount of excavation required, therefore, reducing the overall time and cost of replacement, he said.
Urban center gas infrastructure work is not only given strong political and environmental scrutiny, its economics also can be problematic, particularly with cutting-edge operating techniques being required. In 2024, there was some good news in terms of Wall Street interest in the natural gas sector remaining high, according to a joint study by AGA and its equivalent north of the border, the Canadian Gas Association (CGA).

Investor sentiment towards North American natural gas utilities has improved in recent years, according to the study done by MCR Performance Solutions (MCR) and released jointly in early November by AGA and the CGA. The study, “Investor Perspectives on Natural Gas Utilities: A Canadian and United States Review,” found that investors view natural gas utilities as attractive investments for maintaining stability in their portfolios while supplying a reliable and predictable return on equity (ROE).
Additionally, investors view the perceived regulatory risk embedded in natural gas utility-allowed ROEs as having decreased in recent years. That bodes well for future gas infrastructure investments.
“Investors choose to invest in utilities because they provide a stable revenue stream accompanied by the low-risk level inherent to the business,” said AGA Managing Director of Energy Analysis Juan Alvarado. “Over the past two years, investors increasingly recognize the value of natural gas and related infrastructure to provide affordability, resilience, and energy security for decades to come.”
Another factor affecting future demand, which encompasses the theme of the incoming NARUC president from the Georgia Public Service Commission, Tricia Pridemore, is continued strong consumer preference for gas in their homes and small businesses. In 2024, AGA among other gas boosters underscored the continuing reality of these preferences.
AGA and various trade organizations like state and national restaurant and building/construction associations have emphasized the need for regulators to maintain choice. “It’s something consumers value when making decisions about where to move,” the national gas organization continues to stress. The ability to choose things like how to heat their homes or cook their favorite meals is a treasured right for many homebuyers and homeowners.”
Households that use natural gas for heating, cooking and clothes drying save an average of $1,132 per year compared to their all-electric counterparts, according to AGA statistics. “The price of natural gas is projected to be 30%-50% lower than the price of other fuels through 2050, preserving those energy savings long term,” AGA studies maintain. The trade group’s “Energy Star”-rated heat pump provides 28% lower emissions compared to an electrical resistance furnace, natural gas advocates argue.
Richard Nemec is a long-time contributing editor at P&GJ, based in Los Angeles. He can be reached at rnemec@ca.rr.com.
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