Natural gas utilities and power generators in southern New England will have access to additional gas supplies this winter as Spectra Energy brings its 342-MMcf/d Algonquin Incremental Market (AIM) project into service. But Kinder Morgan’s planned 72-MMcf/d Connecticut Expansion has been set back a year (to November 2017) due to permitting delays and, more important, a multi-state effort to enable electric distribution utilities (EDUs) to contract for gas pipeline capacity for generators appears to have died, and with it prospects for at least one major project. Is New England destined to remain gas-supply constrained for years to come?  Today we consider recent developments regarding gas supply in the northeastern corner of the U.S., and what they may mean for Marcellus/Utica producers.

New England would seem to be a natural market for natural gas produced in the nearby Marcellus/Utica. Not only is the six-state region close to some of the most prolific shale gas reserves in the world, in recent years New England has been shutting down a number of its coal-fired and nuclear units, ramping up its use of renewables, and developing new gas-fired power plants to replace the retired coal and nuclear plants and to back up the variable output of solar and wind farms. Midstream companies most active in the region (Spectra Energy and Kinder Morgan chief among them) have been working tirelessly to advance pipeline projects that would significantly enhance the capacity of New England’s existing network, but only with limited success. We’ve written extensively about these efforts, both in Drill Down reports (Please Come to Boston and 50 Ways to Leave the Marcellus) and blogs (Don’t Give Up on Us and Time in New England), largely because 1) pipeline constraints during Polar Vortex-like events in the past have caused spectacular spikes in regional natural gas prices, and 2) Marcellus/Utica gas producers need incremental gas demand if they are to continue growing and, as we said, New England seems like such a logical candidate.

Well, there’s good news and bad news. The good news is that the Federal Energy Regulatory Commission (FERC) in late October approved the November 1 (2016) start-up of most of Spectra’s 342-MMcf/d AIM project––the largest expansion of New England pipeline capacity in several years. The balance of the project is expected to go online sometime in December. AIM consists of a series of expansions, upgrades and modifications to Spectra’s Algonquin Gas Transmission (AGT) system, which transports gas through northern New Jersey, the lower Hudson River Valley, and Connecticut and Rhode Island to metropolitan Boston (see Figure 1).