Planning for a Gas-Fueled Nation

Every year, 40 or so students in the MIT Center for Transportation & Logistics' (MIT CTL) Master of Supply Chain Management (SCM) program complete one-year research projects. The students are early-career business professionals from multiple countries with 2 to 10 years of experience in the industry. Most of the research projects are chosen, sponsored by, and carried out in collaboration with multinational corporations. Joint teams that include MIT SCM students and MIT CTL faculty work on the real-world problems. In this series, we summarize a selection of the latest SCM research.

The SCM research project A State-Level Capacity Utilization Analysis of the US Natural Gas Transmission Pipeline System and Risk Management for a Gas-Fueled Nation was authored by Lauren Sittler and supervised by Dr. Alexis Bateman, Research Scientist, MIT Center for Transportation & Logistics, For more information on the research please contact Alexis Bateman at [email protected].

America's energy portfolio has undergone drastic changes since the early 2000s. Innovations in drilling technologies have allowed states to tap into large underground shale reserves. Pennsylvania, West Virginia, and Ohio have become prominent exporters of natural gas, alongside historically productive states such as Texas, Wyoming, and Oklahoma. While renewables may eventually replace fossil fuels, natural gas production and usage is projected to grow in the U.S. at least until 2050. The price and availability of natural gas in this country makes it an attractive fuel source for greener electricity generation.

But have states gone too far in their adoption of natural gas? Can a pipeline system built mostly over 50 years ago handle new patterns in supply and demand? A capstone research project at MIT CTL performed a simple pipeline capacity utilization analysis to elucidate these issues. The study's findings indicate that America does indeed have a pipeline problem.

Network bottlenecks

More than 60% of America's natural gas transmission pipeline mileage was installed before 1970. Existing pipeline routes are heavily centered around Texas and the Gulf Coast as major production areas. Commercial shale gas drilling began in the early 2000s. The first well in the Marcellus region was drilled by Range Resources in 2004. Since then, production volumes in the Northeast have increased dramatically. By 2014, Pennsylvania became the second largest producer of natural gas, trailing behind only Texas.

The US Energy Efficiency Administration projects that natural gas production in the U.S. will grow by 30% between 2017 and 2050, with operations in the northeast leading in terms of production volumes. In this study, utilization rates were calculated for inflow and outflow pipelines in each state on a monthly basis. The goal was to identify areas where pipeline capacity was constrained. Natural gas production and consumption follow seasonal patterns. The monthly analysis partially captures peaks during times when capacity demand is most extreme.

Policy, investment, planning implications

As a response to the surges in America's natural gas supply, many states are placing emphasis on utilizing natural gas to reduce emissions in electricity generation. As of 2015, Florida produced 62% of its electricity from natural gas. California also produces about half of its electricity from natural gas.

While certain areas of the country see the fuel as an easy win for clean, reliable energy, some states are opposed to natural gas pipelines on environmental grounds. New pipeline projects face opposition in New England. In fact, Vermont has only one natural gas pipeline. Residents without access to natural gas distribution rely on truck deliveries of heavier fuels such as propane.

Considering these trends, it was unsurprising that large inflow capacity utilization was found in Vermont, Florida, and California. Vermont reached an average monthly utilization rate of 97% during January of 2015. Florida's maximum of 84% occurred in July of 2016. California's maximum of 69% occurred in December of 2013. While these utilization numbers may not sound extreme, it is important to take into account that daily fluctuations in demand can be very high and these figures represent a monthly average.

The export capacity analysis revealed another expected result. The highest maximum monthly utilization rate was found in Pennsylvania at 56%. In reality, outflow utilization rates are very conservative as the analysis ignores gas that is neither produced nor consumed but only transported in a state.

Supply risks

Overreliance on natural gas in states that import the fuel without adequate pipeline capacity puts consumers at risk for supply shortages, storage leaks, and accidents from alternative transportation methods. These problems may not be addressed by new pipeline projects any time soon. The Federal Energy Regulation Commission approval process fails to incorporate a holistic view of supply and demand. New approved capacity has largely been focused on the Southwest, while areas such as California, Florida, Pennsylvania, and New England are most in need of infrastructure.

Unless our reliance on natural gas can be reduced, The US needs new pipelines to provide safe, reliable energy. Investments are also needed for the maintenance of old lines. Three of the four top causes of accidents are related to pipeline age.

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