Gas Main Distribution
Many natural gas distribution systems use cast iron mains that were initially installed many decades ago. These cast iron gas mains can no longer be used in new construction. Even though cast iron mains are now technologically obsolete, many natural gas distribution systems pay too much in property taxes for the material. Every dollar invested in cash iron mains could be valued at more than $25 today. The other issue becomes the cost of repair a broken main or to fix a problem after an explosion from the leak or breakdown in a pipeline.
Outside of the price, for tax purposes, of using cast iron pipe in the ground, the age of these pipelines is becoming an issue as well. The life expectancy of pipelines is approximately 100 years, so many of the pipes in use today were installed around the time of the Great Depression, possibly even before that. This is not to say that all pipes are this old, especially with the many pipeline replacement and infrastructure replacement riders in put place by regulators, but it is noteworthy to know an approximation of how old some pipes are. The fact that a pipe this old can be taxed around $25 per $1 invested shows a cause for concern. It cost too much money in taxes for outdated infrastructure and replacement of these pipelines do not happen quickly enough due to the cost to replace and the lag of return on those new dollars invested.
Another problem with aging infrastructure is higher risk of fractures within the pipe, paired with corrosion. This causes two issues, the first being the leaking of gas and the second is the risk of an explosion. As an example, one company in Alabama has approximately 59 leaks per 1,000 miles of their cast iron pipeline. So there are 59 potential areas for tainted ground water and/or an explosion. Another example is the explosion in Harlem, New York City, which demolished half a city block, killing 8 people and injuring 48. Since 2004, gas leaks have caused $2 billion in damages and have killed 135 and injured 600.
With the high cost of taxes on aging pipeline and the risk of damage due to weak or broken pipe, more aggressive pipeline replacement programs need to be introduced. It puts a burden on many utilities to replace pipeline because of the high cost of replacement on top of what they are being taxed for the existing pipeline. A more aggressive program may put more of a burden on customers, however. There needs to a proper balance of interests between the utility, its customers and the regulators in order to get the replacement accomplished more efficiently. In addition to a different type of replacement program, the tax on ageing infrastructure should be assessed as well. $25 for every $1 spent on a 50-100 year old pipe does not seem proportional. The possibility of looking into how pipe is taxed and changing the way pipe is taxed or adjust other accounting data to compensate for the high tax. There seems to be a few options to fix the issue, but nevertheless, new pipe needs to go into the ground quickly in order to reduce the potential hazards that exist and to reduce the price burden on utilities and ultimately, the customers.
References: http://www.uvm.edu/~vlrs/Energy/VLRS%20Natural%20Gas.pdf http://www.montgomeryadvertiser.com/story/news/local/2014/09/23/corroding-cast-iron-pipes-are-explosion-risk/16128733/ http://www.usatoday.com/story/news/nation/2014/09/23/gas-pipes-cast-iron-deaths-explosions-investigation/15783697/