Mark Davidson | Energy Intelligence Group | US gas pipeline advocates scored a big win this week when state regulators approved key permits for Williams’ Northeast Supply Enhancement project (NESE), clearing the way for construction of the $1 billion gas project.
NESE, written off as dead before making a surprise comeback last summer, had become a symbol for industry and political frustration over the challenges in building enough capacity to meet an expected surge of gas demand through the early 2030s.
But the reality on the ground may not justify the angst in the corporate boardrooms and legislative hearing rooms.
In all, midstreamers have reached final investment decisions (FIDs) on more than 34 billion cubic feet per day of new pipeline capacity set to come on line between 2026 and 2029, according to East Daley Analytics. The vast majority is in the Permian Basin and Gulf Coast regions.
That exceeds even the most bullish analyst projections of gas demand growth driven by LNG exports and power generators to serve data centers, which range from 18 Bcf/d to 27 Bcf/d through 2030.
“Our members report a record number of inquiries for additional capacity from potential customers,” Amy Andryszak, president and CEO of the Interstate Natural Gas Association of America, told Energy Intelligence. “They indicate that they have not seen this level of interest since around 2010, when the shale boom drove interest in pipeline development. Some members are already announcing new or revived projects, and we expect more will file for certificates at the Federal Energy Regulatory Commission (FERC) over the next 18 months.”
Source: Energy Intelligence, East Daley Analytics
Jack Weixel, East Daley’s senior director of energy analysis, told Energy Intelligence that “pressure from data center developers for reliable fuel sources for power is a boost for the gas industry.” He also said the friendlier political and regulatory climate since the reelection of President Donald Trump has given midstream companies and their investors more confidence.
And Weixel cited “the probability of real permit reform” in Congress next year, which would expedite approvals and limit states’ veto power over federally approved projects, as a driver of investor interest in new pipelines.
Too Much of a Good Thing?
With market and political pressures easing, some analysts believe the market could find itself with a surplus of pipeline capacity rather than a shortfall, at least temporarily.
“All of these projects are FID’d. They are moving forward barring a total financial collapse of any of the backers,” Weixel said.
In the short run, that could create capacity overbuild in the Permian, where 9.1 Bcf/d is planned by 2030, while the basin’s production grows by only 6 Bcf/d.
“The producers who are taking capacity on these new pipes are making a bet — Waha prices rise because the basin becomes unconstrained, and on a unit basis that is greater than whatever reservation rate they are paying on that new pipe,” Weixel said.
He believes the new capacity will become fully subscribed as Waha basis improves, which could make price spreads on northbound capacity to the Midcontinent uneconomic.
“So if we’re looking for winners and losers by 2030, new pipes are the winners, legacy long haul pipes are the losers,” he said.
Targeting the Demand
Luciano Di Fiori, a partner at consultancy McKinsey, agreed that a Permian overbuild is possible — but only if western Texas spot prices remain deeply discounted and producers dial back production as a result.
Yet, given the virtually guaranteed demand pull from the doubling of Gulf Coast LNG export capacity, “Any overbuild would surely be temporary,” Di Fiori told Energy Intelligence, who authored a new report predicting a 14% increase in total US gas demand by 2030 to 125 Bcf/d.
The build-out of artificial intelligence data centers — and the gas-fired electricity to power them — is much less predictable, both in terms of scope and location, Di Fiori said, and that makes it trickier for pipeline developers to target that demand.
“For the LNG market, we know exactly where it is going to be and that it’s a whole lot of demand in one place,” he said. “Data centers are more scattered, and we don’t always know where they will be.”
But he noted that some hyperscalers are choosing to locate their AI campuses where gas reserves and pipelines already exist, making it easier for midstream developers to plan their investment.
Reversal of Fortunes
For Williams’ NESE project, it wasn’t data centers or LNG but growing concerns about winter gas shortages in the pipeline-constrained Northeast that prompted state regulators to change course.
On Nov. 7, the New York State Department of Environmental Conservation (DEC) signed off on a Section 401 Clean Water Act permit for NESE, which would move Appalachian gas to New York City and Long Island starting in late 2027 by boosting capacity on Williams’ Transcontinental Gas pipeline by 400 million cubic feet/d.
The same day, the New Jersey Department of Environmental Protection issued similar permits for NESE, which had received its certificate from FERC but still required state permits to cross waterways.
Both agencies had denied those permits several times from 2018 to 2020 amid strong opposition to a 17.3 mile section of offshore pipe opponents say will threaten wetlands and marine life.
Williams shelved NESE and Constitution in 2020 and officially scrapped them in early 2024, saying it couldn’t overcome the states’ political climate. But the company revived both projects in June amid renewed concerns about the Northeast gas and power grids’ ability to keep pace with demand growth.
Williams executives also cited the Trump administration’s stepped-up pressure on state officials, specifically New York Gov. Kathy Hochul, a Democrat. Hochul, who was not in office during the prior rejections, indicated she was open to a different outcome this time.
NESE got another boost in September from the New York Public Service Commission, which strongly recommended the DEC approve the project to avoid “catastrophic” gas shortages during peak winter demand.
In its approval, the DEC said it is “committed to closely monitoring the project’s construction and adherence to all permit conditions to ensure the full protection of New York’s waterways.”
But Williams last week withdrew its New York application for Constitution, which would move gas from Pennsylvania to New England, after state regulators said it failed to meet some key requirements.
“Expanding natural gas infrastructure is vital to lowering costs and increasing economic opportunity,” Williams President and CEO Chad Zamarin said, adding that the company will file new applications for Constitution “to ensure that this critical project obtains the regulatory approvals needed.”
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