Natural Gas Daily
EPA Air Rule Could Snarl Gas Pipeline Grid

Thursday, August 25, 2011

The US gas pipeline grid could face significant constraints due to an expected spike in gas demand stemming from the Environmental Protection Agency's Cross-State Air Pollution Rule, Bentek Energy said Wednesday in a report.

While Bentek said it believes the rule will be delayed, the analysis firm said billions of dollars would have to be spent on infrastructure by the gas and power sectors, including pipeline expansions, transmission line investments, gas-fired power plants and pollution-control equipment at large coal-fired power plants.

The Cross-State Rule will impose a substantial burden on the power industry in the form of more than $15 billion in investments in emission control equipment. The gas pipeline sector may see significant constraints due to big demand increases stemming from switching coal-fired power plants to gas, Bentek said.

Commodity markets are signaling that the rule will not be implemented as scheduled, which would boost gas demand, trim coal demand and lead to higher power prices in the coming years, said Bentek. "Natural gas futures prices and forward basis for 2012 and 2014 have not materially responded to the potential incremental demand associated with the rule," and Bentek said "the significant risks, concerns and costs associated with this rule" will result in a delayed compliance schedule.

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