Assessing Market Needs to Evaluate Natural Gas Pipeline Development

Natural gas has become increasingly important throughout the United States as the primary fuel for new power plants, as well as for continued growth in heating and industrial applications. Market studies to determine a state’s or region's needs and the costs and benefits of natural gas have quickly become an important tool for stakeholders to use in assessing and demonstrating the feasibility and reasonableness of constructing new natural gas pipelines. Especially for regions that are physically near gas-rich producing areas, all stakeholders – pipeline developers, utilities, regulators, governments, businesses, and consumers – have a vested interest in understanding how to balance the costs and benefits of pipeline development. 

For example, the Northern Ohio region had been seeing a growing demand for gas, but no pipeline had been constructed to the nearby Utica and Marcellus shale basins, which have been longstanding producers of low-cost natural gas. The NEXUS Gas Transmission project was introduced as a solution for transporting gas from suppliers to end-use customers.

Analysis Group was asked to conduct a natural gas market study to provide stakeholders in Ohio with insights on the economic conditions behind the NEXUS proposal, and to show how NEXUS would fit the needs in that market. Senior Advisor Susan Tierney and Managing Principal Pavel Darling provided an independent assessment of the state's supply and demand conditions and the attributes of the NEXUS pipeline relative to the growing demand in the region. Their report revealed major shifts in forecast demand by specific users. (See Figure 1.) Dr. Tierney and Mr. Darling also analyzed overall economic activity for the state and for key regions that would be impacted most by the availability of a new natural gas source. (See Figure 2). Together, these analyses highlighted specific details on how NEXUS would add value to the region.

Analyses like these are important in the context of potential new proposals for natural gas pipelines (and other energy facilities). Analysis Group has extensive experience in helping both public and private sector clients gain sophisticated insights into the impact of infrastructure development and operation on effective energy policy and efficient energy delivery. Our multi-disciplinary approach to this work allows us to leverage not only experience in natural gas infrastructure, but also related work in electricity markets and power plant siting, including providing expert testimony in regulatory environments. ■