The growing supply of natural gas in the U.S. remains the driving impetus behind a large number of midstream infrastructure projects, a panel of experts told attendees at the recently held Marcellus Midstream conference.

Robert Parks, president of Superior Pipeline LLC, said the company spends about $225 per year in capital expenditures, about half of that in the Appalachian basin. Superior is working to finalize the 16-mile, 12-inch and 16-inch diameter Pittsburgh Mills gathering system, which lies immediately north of Pittsburgh. The line's initial deliveries flowed into the Dominion Transmission line, with the permanent line's first flows scheduled for May 2012.

In addition, Superior is in the process of extending the Bruceton Mills Pipeline Project in northeastern West Virginia. The 16-mile, 16-inch diameter gathering system connects with Columbia Gas Transmission Co's line 1804, with a delivery capacity of 220 MMcf per day. It went into service in November 2011, Parks said.

Elsewhere, the company's Superior's Snow Shoe Pipeline Project, a trunk line of about 15 miles, will include a 24-inch diameter line in Centre and Clearfield counties in Pennsylvania. Superior has secured all of the rights-of-way and regulatory permits and is waiting for drilling activity in the region to pickup, he said.

Stan Chapman, senior vice president of customer services and marketing at Nisource Gas Transmission and Storage Co., said many of the challenges facing the natural gas industry today stem from the fundamentals of supply and demand.

From 1990 until about 2005, U.S. domestic production of natural gas averaged about 50 Bcf per day. "We really didn't have any significant growth at all," he said. After 2007, growth in production picked up and is expected to continue to grow. "That projected supply growth is really the driver behind a lot of the infrastructure projects we are talking about today," he said.

Within Canada, supplies are flat or growing marginally, but the demand for gas continues to grow. "There is less gas available from Canada to be imported into the U.S.," Chapman said. Meanwhile, more natural gas exports could go to Mexico, leaving a tighter market for gas in the U.S.

In the Marcellus, analysts expect production to increase from 4.1 Bcf per day in 2011 to 9.4 Bcf per day in 2015, and to about 14 Bcf per day by 2020. Demand in the Northeast, meanwhile, is expected to grow more slowly than supply. By 2019, Chapman said the Northeast will be self sufficient by 2019, and supply will exceed demand.

"That means that gas has to find a way out. It has to go somewhere," he said. "The challenge we face is how do we physically get those supplies out of the region."

Stan Brownell, vice president business development at Millennium Pipeline Company LLC, agreed that the changing dynamics of natural gas production in the Marcellus continues to have a dramatic effect on how the midstream industry invests.

Millennium's system was originally designed to receive natural gas from the Empire system to bring gas from Canada and take it to markets in New York. Consolidated Edison Inc., Central Grid and Central Hudson Gas and Electric Corp. were the main customers for the system, which was originally designed to move 525 MMcf per day from west to east, he said. But the growing production from Marcellus has compelled the company to transform into a header system that can move gas in a variety of directions depending on the needs of the market, Brownell said.

Also, midstream operators face growing scrutiny and pressure from regulators, Parks said. Midstream operators must respect the role of regulatory agencies, but he called for a number of reforms that could be implemented to make the regulatory environment understandable.

Regulators should develop rules which are homogenous across the region, the rules need to be clear, and the agencies need to interpret and implement them uniformly. In some cases, Parks said staffing shortfalls at regulatory agencies have prompted lower level employees to assume responsibilities that their job descriptions do not inherently have.

Parks invited attendees to engage in an ongoing public discussion about the challenges and opportunities facing the energy industry with the general public, many of whom continue to see hydraulic fracturing as an unsafe technology. "We have a continuing PR battle which is actually getting worse, not better," he said.

The low and declining price of natural gas continues to encourage producers to develop wet gas areas. Despite the current price structure, lower gas prices has not yet translated into lower construction and labor costs for midstream operators. "There generally is a lag in lowering costs and they are not coming down yet," he said. Also, super majors Chevron Corp. and ExxonMobil Corp. have announced they will continue to drill, a policy which could continue to pressure gas prices, he said.