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As temperatures dropped well below freezing in the Northeast U.S. around Christmas, Bloomberg reported that in New England, natural gas spot prices rose more than threefold to the highest in over three years and "turned the region into the world’s priciest market," with gas for next-day delivery on Enbridge’s Algonquin system settling at $35.35 per million British thermal units.
A few days later, the spot prices in New England had fallen back to $19.75, as reported by MassLive.
When one considers that the NYMEX price for natural gas on that day was sitting at a few cents above $3/mmbtu, that's some pretty pricey gas that New Englanders were paying for. Back in the "old days," i.e., before the advent of the production of natural gas from shale formations, a winter event like this, combined with a storage level that is well within the 5-year range, would have sent that NYMEX price up dramatically, where it would have lingered until things warmed up. But in today's world, that price represented a rise of barely 10%.
So what, you might ask, is going on in New England? As MassLive reported, the biggest reason for what will be a short-term blowout in natural gas prices for power providers is a lack of pipeline capacity.
"Chicago does not have the same pipeline constraints as New England and parts of New York," said Stephen J. Leahy, vice president of policy and analysis for the Northeast Gas Association, an industry trade group.
MassLive cited "popular resistance" to new fossil fuel infrastructure in Massachusetts, but for this unhappy circumstance, New Englanders can largely thank their neighbors in New York State, and more specifically, New York Gov. Andrew Cuomo. Per the U.S. Energy Information Administration, New York generates more than 40% of its electricity using natural gas, and more than half of the state's residents heat their home with the fuel, which in the rest of the country is quite abundant and cheap.
The trouble for New Yorkers - and for everyone in New England by extension - is that, as I reported back in April, Gov. Cuomo has spent his entire term in office demonizing natural gas. Not only did his administration take the extraordinary, completely unwarranted action of outlawing hydraulic fracturing operations in the state, the Governor himself has made a point of personally working to obstruct the building of much-needed new pipeline capacity to bring natural gas from the Marcellus Shale into the state from Pennsylvania and West Virginia, whose residents and state governments are profiting immensely from oil and gas operations.
As if it weren't bad enough that Cuomo's actions are denying thousands of New York residents the right to exercise their property rights and causing the state's residents to pay higher prices for home heating and electricity, Cuomo's obstruction costs New Englanders as well.
Why? Geography. It's impossible for any company to construct a pipeline to move natural gas from the Marcellus region to New England without going through New York , which forms a land barrier between the two regions. The U.S. Chamber of Commerce issued a report early in 2017 quantifying the cost of Cuomo to New York and the New England region. It said residents of the Northeast pay 44% more than the national average for electricity and 29% more for natural gas, while regional manufacturers pay 62% more for their electricity supply than the national average.
The report claimed that without the building of new pipelines, by 2020 New York would lose out on 17,400 jobs, $971 billion in labor income, and $1.6 billion in economic benefit. For the region: 78,000 lost jobs, $4.4 billion in lost labor income, and $7.6 billion in lost gross domestic product.
So, while this current price spike is temporary in nature and will ease off as the weather warms up, the sad reality is that the political actions by the governor of a single state are costing residents of an entire region of the United States dearly. If you live in Massachusetts, Connecticut, Rhode Island, Vermont, New Hampshire or Maine, you might want to think about writing Gov. Cuomo a "thank you" note when you open up your next utility bill and see what he's costing you.
