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Williams CEO Puzzled as U.S. Northeast Burns More Oil for Power

(Bloomberg) -- Sit down with Alan Armstrong, CEO of Williams Cos., and it doesn’t take long for his frustration over U.S. energy policy to bubble to the surface.

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“There’s kind of this political version of the truth, and then there’s good, hard science and facts,” Armstrong said in an interview at Bloomberg headquarters in New York. “When I hear people that are really serious about climate change and they’re ignoring those kinds of really hard facts, like right here, right now kind of solutions ... it’s really odd to me.”

The right-here-right-now solution he’s principally referring to is getting more natural gas pipelines into the Northeast.

He’s talking his book here to a large degree, of course. Tulsa-based Williams is one of the biggest pipeline operators in the country, and it’s seen proposed projects get killed by regulators, courts and lawmakers in recent years.

To underscore his point, Armstrong cites a spike in the use of fuel oil in New England this past winter. The region, which has limited ability to bring natural gas via pipeline from neighboring states in the prolific Appalachia Basin, burned the most oil to generate electricity in over a decade, grid data show, though spikes in oil consumption only occurred on the coldest days. If the Northeast continues to consume more oil to produce power, emissions are likely to rise, Armstrong said. It’s become so hard to build new pipelines in the Northeast, in fact, that Armstrong argues that gains in reducing emissions in the U.S. will come over the next several years from the South and other parts of the country where it’s easier to get regulatory approval.

“We have plenty of supply here. We are just simply lacking the infrastructure,” said Armstrong, who’s been at Williams for 36 years and the CEO since 2011. “The producers are not going to try to grow up against that constraint of pipeline capacity.”

The environmentalists who oppose the expansion of the pipeline network argue that while natural gas may be cleaner than the oil being burned to power Massachusetts, Connecticut and other states, putting down new pipeline for it will only prolong the amount of time that fossil fuels are used in the region. What’s more, natural gas is predominantly made up of methane, which is over 80 times more powerful than carbon dioxide as a global warming agent when released directly into the atmosphere. So to many of them, the answer is to jump right to renewable energies and skip over gas.

Armstrong says that given the rate of increase in energy demand as well as the constraints on building solar and wind facilities, and the fact that hydrogen produced with renewables isn’t widely available, there’s no quicker way to cut carbon emissions in the Northeast without expanding natural-gas capacity. The cost of gas, he points out, is a lot less than those other fossil fuels, too.

“We don’t seem to care about the next 10 or 15 years,” Armstrong said.

But researchers say the fastest way to slow global warming is to cut methane emissions from pipelines, one of the few new pledges almost every country agreed to at the 2021 United Nations Climate Change Conference. Armstrong counters that Williams is working to tackle methane emissions, detailing an industry initiative to work with the nonprofit Gas Technology Institute to develop a framework for measuring leaks.

America’s Northeast sits on some of the world’s largest reserves of natural gas. The Appalachian Basin, which includes the Marcellus and Utica shale plays, accounts for about a third of all U.S. dry gas output. Producers in the region sell their gas to utilities in places like Philadelphia and New York as well as to export terminals in the Gulf of Mexico through a tangle of pipelines operated by companies such as Williams and Kinder Morgan Inc.

While extracting gas from Appalachia has probably never been so profitable, production growth is limited because there are no conduits to move additional supplies. A series of proposed projects, including Williams’ Constitution pipeline, have been killed after legal battles. The Mountain Valley Pipeline, owned by a consortium of companies including Equitrans Midstream Corp., has been delayed by several years amid permitting setbacks.

Armstrong said that Williams’ relationship with the Federal Energy Regulatory Commission, which oversees interstate gas pipelines, is “very constructive.” He said he’s surprised at how optimistic he is about the state of those relations, given how rocky they’ve been in the past, but that the primary problem right now is negotiating with regional officials.

Williams is still pursuing to expand capacity along its Transco pipeline, a 10,000-mile (16,093-kilometer) artery system extending from South Texas to New York City. The pipeline operator, which was founded in 1908, is currently working on six projects that will allow it to move an additional 1.9 billion cubic feet of gas — the equivalent to roughly 2% of U.S. gas production — to meet growing demand in places like North Carolina and from liquefied natural gas export facilities along the Gulf Coast.

While holding less gas reserves than the Marcellus and Utica formations, production in the Haynesville and Permian basins — located in Louisiana and West Texas, respectively — is likely to grow faster over the next years because pipelines can be easily built there, Armstrong said.

Prices for U.S. natural gas surged above $8 per million British thermal units earlier this month. With adequate infrastructure, the commodity could be trading at the $3 mark, according to Armstrong. Though Gulf Coast LNG export terminals are operating at or near capacity, he says pipeline constraints have also limited U.S.’s ability to help Europe slash its dependence on Russian gas following Moscow’s invasion of Ukraine.

“As a U.S. economy, we’ve been our own worst enemy in terms of stopping pipeline projects, because that is driving up the consumer price. And it’s really limiting our ability to use gas as a geopolitical tool around the world.”

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