American Oil and Gas Reporter - December 2024 - 73

NEPA shortcomings. Even if the D.C.
Circuit had decided City of Port Isabel
correctly, the appropriate remedy would
have been to remand without vacatur,
the brief maintains.
The document calls on all D.C. Circuit
judges to review the case together. " The
panel opinion conflicts with this court's
precedent holding that federal regulators
and judges cannot wield NEPA fly specks
to undercut Congress's strong public interest
in building LNG facilities, " the
document says. " That intra-circuit disagreement,
without more, is sufficient
ground for an en banc review. "
Ultimately, the brief asserts, the law
requires a rehearing. " Respectfully, federal
courts cannot overcome such critical,
congressionally established public interests
by insisting on more paperwork, "
it concludes.
❒
Data Centers Driving Up Gas Demand
NEW YORK-Increasing energy demands
from data centers across the United
States will boost natural gas demand by
as much as 6.0 billion cubic feet a day by
2030, from a starting point of almost zero
today, S&P Global Ratings predicts. It
says low-risk manageable capital expenditure
projects that expand capacity have
the potential to meet this demand, especially
in gas fields near data center growth hubs
in Virginia, Texas and the Southeast.
The report notes data center expansion
is central to the expanding fields of cloud
computing and artificial intelligence. It
foresees that the continued sustained
growth in data center capacity will require
significant amounts of new energy that
renewable sources cannot meet.
" North American midstream energy
suppliers are already benefitting from increased
revenues due to geopolitical energy
security concerns, " S&P Global Ratings
writes. " Additional demand from data centers
should contribute to at least a decade
of supply growth that should be supportive
of midstream sector credit quality, though
the benefits will accrue most to operators
in gas fields near data center hotspots. "
Precisely how significant the demand
for gas will prove to be remains a subject
of debate and widely varying forecasts,
the report points out. Much of that uncertainty
is attributable to potential variation
in data center demand, which is
nascent and subject to a host of physical
and logistical constraints, including economic
incentives to promote new generation
and transmission infrastructure that
will influence the extent of its growth,
S&P Global Ratings says.
The report's model of data center energy
demand growth concludes that if
50% of incremental capacity comes from
natural gas-fired units (including baseload
and peak suppliers), the electric grid will
require as much as 50 gigawatts of incremental
generation supply. It forecasts as
much as 3.0 Bcf of this demand can be
met with natural gas, noting that estimate
may change depending on the energy
mix that serves data centers. Total U.S.
gas demand in 2023 averaged about 89.1
Bcf/d, with the power sector the largest
consuming sector at 35.4 Bcf/d, according
to the U.S Energy Information Administration,
a 7% jump over 2022.
" Based on that forecast, we expect that
data center demand will likely support
(though not fundamentally alter) the credit
quality of some of the largest natural gas
logistics companies that we rate, " S&P
Global Ratings says.
A Fast, Easy Solution
The report cautions that forecasts of
increased natural gas demand can appear
at odds with the declarations of technology
companies. Hyperscalers (large-scale
cloud service providers such as Google,
Meta, Microsoft and Amazon), which are
partly responsible for the increased number
of data centers, generally have targeted
substantive reductions in carbon emissions
by 2030, with most also committing to
increased use of renewable or carbonneutral
energy sources.
S&P Global Ratings says it considers
that its high-end estimate of 6.0 Bcf/d
can be realized with natural gas assuming
a role as a backup fuel because of renewable
energy's intermittency.
" Gas demand should also benefit from
generators' ease of access and cost advantages
if new infrastructure is needed, "
the report states. " Data center investment
budgets may have to balance innovation
on the energy demand side against gains
on the information technology side, where
cash will be needed to invest in better inferencing,
agent-based AI, and other AIrelated
innovations. "
Building laterals shorter than 50 miles
between long-haul pipelines and generators
will prove to be among the easiest, fastest
and most affordable options to meet this
emerging demand for energy, S&P Global
Ratings holds. " Companies we rate have
supported this thesis with small projects
in their backlogs that include manageable
capital outlays in the $15 million-$50
million range to construct a brownfield
pipeline lateral to a generator behind the
meter (including their own generation
assets) for data center demand, " it says.
The risks of such projects are minimal,
the report estimates, given that they can
use land already dedicated to pipelines,
such as existing rights-of-way, enabling
companies to avoid complicated permitting
processes and community resistance, compared
with large-scale builds. Most interconnections
can be completed within
12 months, which S&P Global Ratings
notes are faster than the infrastructure
constraints on the generation side.
Going Where The Gas Is
It is no coincidence that U.S. data
center construction focuses on areas
close to prolific natural gas production,
the report says. It cites centers in northern
Virginia clustered near Marcellus Shale
production and construction in the Dallas-Fort
Worth region that has easy access
to Permian Basin production. " That proximity
should facilitate supply by new
merchant generators (as opposed to regulated
utilities), though development of
that capacity has not yet materialized, "
S&P Global Ratings observes.
According to the analysis, natural gas
generation from both regions will remain
viable for data centers through 2030 and
beyond. Its forecast sees Permian gas
production continuing to increase through
2038, peaking at 11.9 Bcf/d. Marcellus
output is likely to be constrained by an
inability to build new natural gas infrastructure
beyond the recently completed
Mountain Valley Pipeline, which S&P
Global Ratings says will add 2.5 Bcf/d
to the region's takeaway capacity.
" We expect renewables growth will
displace natural gas through 2035 in PJM,
while natural gas usage should remain
steady in Texas (in the regions operated
by the Electricity Reliability Council of
Texas). We think the combination of those
trends in these power regions could increase
natural gas production by as much
as 1.0 Bcf/d attributable to data centers, "
S&P Global Ratings predicts.
The analysis assesses that increased
electricity demand from data centers should
benefit the midstream industry and prove
an additional source of growth capital and
contracted cash flow, although S&P Global
Ratings argues that growth of liquefied natural
gas as well as incremental residential
and industrial demand for gas through 2030
will more meaningfully influence midstream
companies' creditworthiness.
❒
DECEMBER 2024 73
American Oil and Gas Reporter - December 2024

Table of Contents for the Digital Edition of American Oil and Gas Reporter - December 2024
