There’s no denying America’s quick emergence as an energy superpower. With breakthrough technologies and cutting-edge production processes, the United States is now able to take advantage of our vast energy resources like never before. Consequently, the U.S. is poised to become the world’s leading producer of both oil and natural gas – transforming our energy future in a manner few could have realized just a few short years earlier.
As this energy renaissance takes shape, a critically important and fundamental challenge arises – how do we as a nation efficiently and safely transport our growing energy resources to the consumers and communities who need them most?
Our nation’s current system of pipelines, storage terminals and other infrastructure components is expansive and traverses the country over and back many times. Indeed, the U.S. has the most advanced energy network in the world and pipelines are the safest way to move large amounts of energy across long distances. Still, our current infrastructure is not enough to meet growing supply and changing market needs and the network we maintain must be upgraded.
Therefore, if our nation is to meet its full energy potential and ensure that all Americans can share in its promise, we must invest much more in energy infrastructure over the next decade and beyond.
A recent report by ICF International revealed that the United States and Canada will require a total of $641 billion – or nearly $30 billion per year – in natural gas, crude oil and natural gas liquids infrastructure investment by 2035. This figure reflects investments needed to construct pipelines and other infrastructure in areas like the Marcellus and Eagle Ford shale gas plays, which are areas that have yet to be fully connected to existing infrastructure.
While this level of infrastructure investment might seem difficult to realize in this economic climate, in reality, it is very much possible to meet these needs through private financing tools that already exist. Capital investments in the midstream energy sector have traditionally funded the build-out of pipeline networks, and as America continues to increase its oil and natural gas output, private investment in infrastructure is thriving – and master limited partnerships (MLPs) are a key catalyst.
MLPs are businesses primarily engaged in energy infrastructure activities. These businesses raise capital from a broad base of investors by utilizing public equity and debt markets. The investors, known as unitholders – as opposed to shareholders in a publicly-traded corporation – own a unit of the MLP’s business and are eligible to receive quarterly cash distributions.
It is worth noting that the growth our country is seeing in the MLP marketplace is tied directly to the growing demand for energy and its availability from newly developed sources. In return for participating in the build-out of the country’s energy infrastructure, individual investors receive a reliable income source – making MLPs a win-win scenario for American households and our larger U.S. economy.
And MLPs do not just own and operate existing midstream assets; they are building, expanding, and operating new domestic energy infrastructure projects. In fact, from 2007-2012, the largest MLP companies invested approximately $88 billion in new infrastructure construction. Last year alone, MLP businesses invested more than $29 billion, bringing total recent investment to approximately $117 billion.
Those critical investments can be seen in projects like the Ohio Pipeline Energy Network (OPEN) a proposed pipeline that will transport natural gas from the shale producing areas in Ohio to growing markets in the Midwest, Southeast, as well as the rapidly expanding manufacturing and petrochemical complex along the U.S. Gulf Coast – providing direct access from Utica shale natural gas to the Gulf Coast for the first time.
In the Great Plains, the Lonesome Creek plant project will be one of the largest natural gas processing plant in North Dakota, treating up to 200 million cubic feet of natural gas per day and raising the company’s processing capacity to 800 million cubic feet per day statewide. Then there’s the Seaway Pipeline – a pipeline from Cushing, Oklahoma to Freeport, Texas – that is expanding its system, more than doubling its pipeline capacity to transport crude oil to the Gulf Coast.
These are just a few examples of the type of growth we are seeing on the domestic energy front and of the infrastructure projects underway across the country. Moving forward, it is imperative that we make a national commitment to build more world-class facilities and pipelines to fully take advantage of our domestic energy supplies. MLPs can help do just that and serve as a key driver in building our nation’s energy future.
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