Save Article Instructions
Close 

INGAA: Wider economic pressures could hamper gas pipeline financing

Nick Snow
Washington Editor

WASHINGTON, DC, Jan. 14 -- While US natural gas pipelines remain financially strong, broader economic conditions could challenge their ability to raise money to expand and maintain their systems, the Interstate Natural Gas Association of America warned on Jan. 14.

"The industry's ability to continue to invest in safe, reliable energy infrastructure is challenged by an inability to access capital on reasonable terms," INGAA Pres. Donald F. Santa said in a Jan. 14 letter to President-elect Barack H. Obama.

"Consequently, like other capital-intensive segments of the economy whose growth depends on access to external financing, the interstate natural gas pipeline industry would benefit from [a] tax policy that promoted investment in infrastructure, plant, and equipment," Santa said.

Accelerated depreciation, investment tax credits, and a reduced dividend tax rate could be part of such a policy, he said.

Santa noted that as transportation service providers, INGAA members "take great interest in the discussions concerning energy infrastructure in the upcoming economic stimulus legislation and future energy legislation."

Low-emission backup
Natural gas is in a position to play a significant role as the US makes the transition to a lower-carbon economy and complements renewable technologies such as wind and solar power by providing low-emission back-up generation, according to Santa.

Gas pipeline construction has increased dramatically in response to booming domestic supply development, he added. "The interstate pipeline industry has invested $51 billion already in this decade to maintain and expand the US natural gas transmission network," Santa said, adding that 2008 likely will represent the largest single-year increase in gas pipeline capacity since the 1960s.

Santa said the US Federal Energy Regulatory Commission's regulatory regime for authorizing new pipeline construction and the pipeline rate certainty provided by the Natural Gas Act have been instrumental in this infrastructure development.

"While we do not believe that the natural gas pipeline industry needs federal funds to continue our infrastructure expansion and upgrades, we do believe that maintaining this regulatory certainty will be essential to raising additional private capital," he said.

The INGAA official specifically questioned proposals to change the Natural Gas Act by decentralizing the process for authorizing new pipeline construction and alter the ratemaking regime, which he said would place future and existing pipeline investments at greater risk.

"We urge policymakers to avoid changes to the pipeline regulatory program that would increase the cost of capital for, and drive investment away from, new natural gas pipeline infrastructure," Santa said.

Contact Nick Snow at nicks@pennwell.com.


To access this Article, go to:
http://www.ogj.com/content/ogj/en/articles/2009/01/ingaa-wider-economic-pressures-could-hamper-gas-pipeline-financing.html