Energy Investor Monthly – June/July 2025

INSIGHTS OF THE MONTH

The Constitution Pipeline: Why Is It a Critical Energy Infrastructure Project?

Recently, there has been significant attention paid to the revival of two domestic pipeline projects aimed at supplying consumers in the energy-demanding Northeast with one of the largest natural gas fields in the U.S., located in Pennsylvania, West Virginia, and Ohio. Much of the media and political spotlight has centered on the construction of a critical piece of energy infrastructure, the Constitution Pipeline—a 124-mile project initially proposed by Williams Corporation (WMB: NYSE).

Stretching from the gas-rich fields of the Marcellus shale formation in Susquehanna County, PA, and extending to Schoharie County, New York, just west of Albany, this 30-inch pipeline, linking the Iroquois and Tennessee Gas Pipeline (TGP) interstate systems, would have the capacity to heat 3 million or more homes in the Northeast – from NJ to Maine. The pipeline would also open a vital energy corridor for consumers and businesses, providing a secure, reliable, and 50% cleaner domestic energy source to a region that currently relies on home heating oil – with emissions similar to those of diesel fuel – during those long, cold New England winters.

The two pipelines that the Constitution Pipeline will connect to are equally important. The first, the Tennessee Gas Pipeline (TGP), owned and operated by Kinder Morgan Inc. (KMI: NYSE), is one of the largest natural gas pipeline systems in the nation, transporting gas from the Gulf Coast of Texas and Louisiana across 15 states to New England. The other, the Iroquois Pipeline, which is owned and operated by the Canadian pipeline company TC Energy (TRP: TSE), transports natural gas from production fields in Canada across New York, through Connecticut, and to consumers in New York City. Importantly, each of these pipelines has connections to other interstate and intrastate natural gas pipelines, creating critical supply redundancies.

Its History and Possible Future

Initially proposed in 2013 by Williams, along with its partners Duke Energy (DUK: NYSE), Cabot Oil (CTRA: NYSE) and Alta Gas Corporation (ATGFF: OTCMKTS), The Constitution Pipeline received approval from the Federal Energy Regulatory Commission (FERC) in 2014, with construction intended to begin shortly thereafter. However, at the request of environmentalists, the New York State’s Department of Environmental Conservation (NYSDEC) denied a critical water quality permit in 2016, citing risks to streams, wetlands, and trout-spawning habitats. This decision, upheld by federal courts, including a 2018 Supreme Court decision to refuse an appeal, effectively halted the project. By 2020, Williams had all but abandoned the plans for the pipeline, writing off $354 million in losses, as regulatory delays and legal challenges had driven costs up nearly 40% from their original construction estimate of $700 million.

However, as part of his declared U.S. energy emergency, President Trump recently signaled his strong support for the Constitution Pipeline, both as a solution to increase energy security and lower costs for consumers in the Northeast. To fast-track the project, he negotiated an agreement with the State of New York and its current New York governor, Kathy Hochul, to approve the construction of the pipeline.

In response to this new opportunity, Williams has refiled the necessary permits with the Federal Regulatory Commission, the US Army Corps of Engineers, and the relevant state agencies in New York and Pennsylvania, as required to restart the construction process. Assuming there are no additional delays, Williams expects to start construction in October 2026, with the pipeline entering service as soon as July 2027.

Why Is the Pipeline Controversial?

Despite all the potential benefits for U.S. consumers and businesses, the Constitution Pipeline has also faced significant controversy. As with most pipeline projects, objections typically fall into two main categories: practical and political.

From a practical standpoint, pipeline construction can have long-lasting environmental impacts, as well as the temporary light and noise pollution associated with any major construction project. While rare, accidents do occur, and the effects can be both immediate and long-term. Finally, the rights of landowners, often involving eminent domain, and their potential impact on land values along rights-of-way, can lead to opposition in communities along the pipeline’s route.

However, as is often the case with most infrastructure projects, it is political opposition that usually has the most significant impact. Here, resistance to the Constitution Pipeline took the form of simple hostility toward fossil fuels in general, and to natural gas produced through hydraulic fracturing, or “fracking,” in particular. In fact, the New York State legislature, along with the current and former Democratic administrations, extended its opposition to the Constitution Pipeline based on the belief that affordable natural gas would displace higher-cost renewable and non-greenhouse gas-emitting sources of energy, and thus, contribute to global warming. However, in the 12 years since the Constitution Pipeline was proposed, the promise of affordable and abundant renewable energy has yet to be realized. In fact, as anyone who lives in the Northeast will tell you, energy prices in the region have continued to skyrocket, with consumers paying up to 55% more for energy, on average, than the rest of the country.

A Critical Connection for the Economy and Energy Security

Perhaps more than any recent energy infrastructure project, the Constitution Pipeline is poised to have a positive, long-lasting impact on both the economic security and resilience of the U.S. economy. For consumers, the pipeline is crucial because it will provide a domestic, low-cost energy source from Pennsylvania and other parts of Appalachia to the energy-hungry Northeast. According to the most recent data from the U.S. Energy Information Administration (EIA), Pennsylvania produced 21.2 billion cubic feet of natural gas per day (Bcfe/d), second only to Texas. New York, the only Northeastern state with gas production, produced only 8.2 billion cubic feet in all of 2023. Therefore, in a single day, Pennsylvania produced almost 3 times as much natural gas as the entire state of New York did in all of 2023!

Today, the only thing preventing this abundant energy resource from benefiting consumers in the Northeast is a lack of infrastructure, which the Constitution Pipeline project will help address. According to some estimates, completing the Constitution Pipeline could lead to a significant increase in the supply of natural gas, potentially helping Northeast residents save up to $1 billion annually in energy costs. At the same time, the pipeline would increase the reliability of the U.S. energy grid and reduce greenhouse gas and sulfur emissions by replacing high-carbon-footprint fuel oil and diesel during the home heating season. This should be a win/win scenario in anyone’s economic or environmental playbook.

Politics vs. Pragmatism

By continuing to keep this critical infrastructure project in regulatory limbo, the State of New York, along with subsequent state and federal administrations, has effectively prevented what many consider a much-needed and obvious solution to the rising energy costs faced by consumers across the Northeast. Unfortunately, the state, along with other select Federal and State regulatory agencies, has prevented this abundant energy resource from fully benefiting its neighbors, particularly those in New England. However, by finally allowing the Constitution Pipeline project to move forward, New York is also providing New England consumers with access to a more affordable, secure, and low-emission energy resource for many years to come. In a world that is becoming increasingly uncertain, particularly regarding energy security, we continue to hope that pragmatism, rather than politics, drives our domestic energy policy.

Sources:

• https://www.williams.com/expansion-project/constitution-pipeline/
• https://www.eia.gov/
• https://www.forbes.com/sites/danielmarkind/2025/05/01/the-battle-over-the-constitution-pipeline/
• New York Could Save New Englanders $1 Billion With Pipeline

ENERGY MARKETS BY THE NUMBERS

U.S. Total Crude Oil Production and U.S. Crude Rotary Rig Count (as of June 6, 2025):

1. West Texas Intermediary (WTI) oil price was $64.54 per barrel (+6.6% m/m)
2. U.S. oil production was 13.4mm bbl/d (+0.3% m/m)
3. U.S. oil rig count was 442 (-5.4% m/m)

The U.S. Commercial Crude Oil Inventories (excluding those in the Strategic Petroleum Reserve) and Inventory Changes (As June 6, 2025):

• Inventory decreased by 9.4 million barrels month over month to 432.4 million barrels (3.4% below the 5-year average).
• Total crude stockpiles, including the Strategic Petroleum Reserve (“SPR”), decreased by 7.0 million barrels month over month to 834.5 million barrels.

U.S. Imports and Exports (as of June 6, 2025):

1. U.S. crude oil 4-week average imports were 6.2 mm bbl/d, up 8.6% month over month.
2. U.S. crude oil 4-week average exports were 3.8 mm bbl/d, down 0.3% month over month.

U.S. Refinery Inputs and Utilization Rates (as of June 6, 2025):

1. U.S. crude oil refinery inputs averaged 17.2 mm bbl/d. Four-week inputs averaged 16.8 million bbl/d, 0.1% lower than the same time a year ago.
2. Refinery Utilization Rate was 94.3%, up from 90.2% for the previous month. This is lower than the same period last year, which was a 95.0% utilization rate.