The U.S. Energy Information Administration predicts the safety of the nation's gas transmission network is a costly issue that won't go away soon.
"The nation's gas pipeline network is aging," EIA said. "Most of the system was constructed before the 1972 peak in natural gas consumption, although newer segments have been added to meet shifting regional supply and demand patterns.
"With proper maintenance and new technology, it is possible to extend the useful life of the existing transmission network. However, significant additional investment may be needed to extend the life of aging plants or to refurbish or replace pipe as it approaches the end of its useful life."
EIA, in its 1995 Annual Energy Outlook, noted that in 1992 the National Petroleum Council conducted a study of the U.S. potential for natural gas.
In that study, NPC estimated the gas pipeline industry could face an average capital investment of $1.7 billion/year in 1991 dollars in replacement and refurbishment expenses through 2010.
EIA said such costs could be greatly increased if the Department of Transportation required tougher regulations such as the rebuilding of pipeline sections to accommodate smart pigs.
The agency estimated normal expenses expected for pipelines, then estimated costs if extensive refurbishment of pipelines were required (see table)(21923 bytes).
EIA said, "If the additional refurbishment and safety expenses modeled in the refurbishment case were fully recovered from customers, the average transmission and distribution markup in 2010 is estimated to increase by 17/Mcf.
"Most of the increase would likely be in fixed costs, which, under current ratemaking practice, would be collected largely through reservation fees paid by core customers subscribing to firm transportation services.
"If the costs were passed through exclusively to core customers, their average transmission and distribution markup in 2010 is estimated to increase by 24/Mcf, or by 10%, compared with the level projected in the reference case."
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