Two Reasons Why Natural Gas Prices Are So High In The Northeast

Every winter, northeast cities like Boston pay astronomical rates for natural gas and import it from other countries while nearby states like Pennsylvania pay 90% less, why? Two unrelated reasons point to the problem. 

Just 311 Miles Can Mean a 900% Price Increase

As winter weather intensifies seemingly every year, those in Massachusetts and other northeastern US states have to ask themselves why they pay 900-1000% more than peers just 311 miles away in Pennsylvania.

Pennsylvania, Ohio, and West Virginia are home to some of the cheapest natural gas prices in the country due to the world’s largest discovery of natural gas in the Marcellus Shale and Utica Shale formations.

The pertinent question remains in what keeps northeastern states from paying substantially more than its peers in the same region with the same challenges for weather and close proximity to natural resources?

Pipeline Infrastructure

One of the key issues, according to the EIA, is the lack of pipeline infrastructure outside of the three states of Pennsylvania, Ohio, and West Virginia. Current pipeline construction limitations make it all but impossible to add needed capacity to the region from sources within the region. In fact, for piped natural gas, some northeastern states receive their product all the way from Texas adding significantly to the cost of each natural gas unit.

Existing pipeline infrastructure is aged, in need of repair, and significantly undersized for modern demand. The costs those states incur are not only in financial terms but also environmental. Directly, aging pipelines are more prone to the risk of leaking into the environment, and due to the extensive journey, that environmental risk not only impacts northeastern states but those along the pipeline from Texas, through the southeast, and up the eastern seaboard. It’s more difficult to shut down those pipelines for testing due to high demand year-round and few alternative suppliers.

Additionally, there are indirect environmental costs. For example, many public transport models and even private vehicles in the aforementioned natural gas-producing states are able to reduce their carbon footprint by using low-cost natural gas vehicles. This doesn’t just help reduce emissions (by more than 2:1) over petroleum burning legacy fleets, but natural gas is typically less expensive costing mass transit riders more money as well as being worse for the environment.

natural gas energy usage pipeline hydrotech
Credit: David Brooks

The Jones Act 

Another component is the Jones Act, a marine act of 1920 that regulated maritime commerce. This law, still on the books today, was initially to incentivize states to use US-made vessels carrying goods between US states by waterway. Sometimes called the Merchant Marine Act, the Jones Act requires that intrastate transport is, in essence, 100% domestic in an attempt to maintain the shipbuilding industry and fight off outside competition from foreign-flagged vessels.

While this achieves the goal of keeping out foreign vessels and keeping the maritime industry in the US strong, it also negatively impacts domestic trade. While accomplishing a goal for the shipping industry, it also harms those who might otherwise have access to cheap natural gas without the use of pipelines simply because it is cheaper to buy from a foreign country than it is from another state.

Who Benefits? 

For a time, the Jones Act might have been a benefit for national security, a holdover from the first World War. Now, however, reluctance for new pipelines is seen as an environmental risk. The irony is that new pipelines have an incredibly low chance of failure due to new technology and robust testing, but older pipelines which are responsible for headline-grabbing leaks and bursts, are the reason that many states do not want new pipelines.

There’s also an ideal solution in which fossil fuels are replaced by green technology, but the generation of power and current infrastructure simply isn’t in place to make green energy a viable option for the region yet.

The real benefactor in reluctance to build new pipelines is, ironically, the foreign suppliers the US was trying to disincentivize with the Jones Act, waivers remain too few and far between to be relevant.

To learn more about pipeline testing, or vessels of any kind, contact us today!

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