Shortage of gas pipeline capacity continues to plague the Northeast

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January 9, 2014

(Reuters; Jan. 8) - Brutally cold weather this week laid bare critical weaknesses in the Northeastern U.S. natural gas system, leaving some states paying vast sums for supplies as Arctic weather enveloped the region. Despite its location alongside the biggest gas deposit in the country — the Marcellus Shale — the Northeast region saw record price spikes Jan. 6 as an unprecedented surge in demand from power plants and homeowners overwhelmed the limited capacity of pipelines into the region.

Spot-market buyers in New York and New England had to pay up to 20 times more for their gas than hubs in Texas and Louisiana. The volatility shows that nearly a decade into a drilling boom that has flooded much of the country with gas, a lack of pipelines has left some areas vulnerable to shortages. "There's a reason why New England is the most volatile power and gas market in the country," said Addison Armstrong, senior market research director at Tradition Energy in Connecticut. "We're behind the curve."

Despite years of supply bottlenecks, only one announced project is targeting New England states. Spectra Energy's Algonquin Incremental Market project will expand an existing system through Connecticut and Massachusetts carrying 342 million cubic feet of gas per day. The pipeline is not scheduled to be completed until November 2016, however, and will not reach past Boston.

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