Grappling with the Majors: Boardwalk Bets on Southeast’s Infrastructure Growth

Scott Hallam joined Boardwalk Pipelines as president and CEO in the fall of 2023 after spending more than 20 years in all sectors of the energy industry, most recently as an executive vice president at the Williams Cos. He discussed his company’s unique position as a gas-transport-only firm—no processing, no gathering—and the development of gas demand in the South with Oil and Gas Investor’s senior editor of gas and midstream Sandy Segrist.

Sandy Segrist: When Boardwalk announced FID on the Kosci Junction Project, one of the headlines covering the news was “Boardwalk grapples with industry giants for Southeast Market.” Why does Boardwalk see the Southeast as a good bet right now?

Scott Hallam: Just with the tremendous amount of economic development that’s taking place in the Southeast—as you would expect, this is nothing new. The Southeast has seen disproportionate growth rates from a compound annual growth rate standpoint. People have been moving south for many years.

Then, couple it with manufacturing or onshoring of activities. Then, certainly, not last and least would be data centers and the power necessary to fuel electrons for data centers. We’re seeing just an exceptional amount of growth activity in the Southeast, so that’s really been a focus area for Boardwalk, and really the industry, to get more natural gas into the Southeast to spur economic development.

SS: What was the trigger to make the FID?

SH: We needed to make sure that we had a minimum volume necessary, or commitment necessary, to justify the pipeline. We achieved that, and a very high percentage of the available capacity has been commercialized and sold to shippers, and so we felt comfortable proceeding with the project and making that final investment decision. We pre-filed earlier this month in February, and we plan to make our full FERC [Federal Energy Regulatory Commission] 7C application submittal in September of this year.

SS: Kinder Morgan has a major project moving to that area as well. Is this a competitive situation or is there plenty of demand for everyone?

SH: Any time you have the amount of economic growth that you see in the Southeast, you’re going to have competitive forces. And certainly, we’re competing with Kinder Morgan and other pipeline operators in this region to deliver natural gas to those markets. What makes the Southeast unique, what I really want to highlight for you, is there is very limited native natural gas production in the Southeast.

When you look at Texas, you look at the Northeast, you look at the Mountain West area of the United States, those areas have to some degree native natural gas production that allows them to utilize it for economic development in the region.

The Southeast does not, so it has to have interstate natural gas pipelines that are transporting the product to them, which makes Florida, Georgia, Alabama, South Carolina, North Carolina somewhat unique in that you have to transport the gas to that region, to those states, for those states to see the natural gas for economic development.

If you look at places like Texas—as you know, there’s gas here, several basins, and it’s really much simpler to get the gas to market. It’s more complicated in the Southeast. So, while it’s competitive, it’s also limited. It’s a big moat, if you will, around the interstates that have pipelines that can serve that part of the world, but it’s also incumbent on us to expand to be able to serve the markets that need more natural gas.

SS: Can you talk a little about your background? You’re obviously familiar with the Southeast from your time with Williams Cos. What were some of the lessons you brought over from your time there?

SH: First, the view of natural gas is very regional. Depending on what region of the country you’re in, it’s misunderstood, it’s an economic driver or, in other areas, it’s a necessity.

Working in the Northeast, working the Pacific Northwest—natural gas is misunderstood. It’s seen as a fossil fuel that’s dirty, and by installing infrastructure, we’re locking it in for decades to come.

In the Southeast, and in Texas and Louisiana, natural gas is seen as an economic driver. It creates jobs. It creates industries. It’s a low-cost fuel that allows industries to grow and thrive.

And then in the Midwest and in other parts of the U.S., it’s seen as a necessity. It’s what heats homes. When you’re in Texas and other parts, it’s not always seen as a primary heat source. In Wisconsin, in Illinois and the Dakotas, it’s seen as how you heat your home. It’s necessary, you have to have it in order to live. And so, when you talk about natural gas in different parts of the country, you talk about it differently, because your audience thinks about it differently.

Second, is that safety and reliability is what really powers our social license to operate. If we don’t have those two elements, then you can’t rely on natural gas and, therefore, it jeopardizes your ability to continue to operate into the future.

And then lastly, I would say stakeholder engagement is really, really important. Especially managing through the COVID-19 and energy transition phases of our economy, we understand who those stakeholders are. That includes our employees, it includes the communities that we operate in, it includes the officials that are part of the decision-making process. It’s not just customers. We have to

look at all stakeholders as part of how we operate and how we grow. Ultimately, we have to take on a mindset that we listen, learn and adjust as we’re working with employees, communities and other elected officials as we grow and operate our business.

SS: What did you know about Boardwalk prior to joining the company?

SH: When I was at Williams, Boardwalk was seen as a really nimble and effective pipeline operator with a high standard, in terms of safety and reliability. Customers that were served by Boardwalk were customers that stayed with Boardwalk. It has a really good employee culture. When people come to work at Boardwalk, they stay at Boardwalk.

SS: Looking over Boardwalk’s assets, I did not see any gas processing. Did I miss something or is that intentional?

SH: We do not own any gas processing or fractionation. We’re as close as you’re going to find to a pure-play natural gas transmission and storage business. I don’t know that there’s any other midstream operator that is more focused on transmission and storage than Boardwalk, so we have no plans of changing that. We do own a liquids business, so we transport ethane, ethylene, propane and brine, and it’s a meaningful part, but the heavy focus of our mission is around natural gas and natural gas transmission and storage.

SS: What’s the advantage of that strategy?

SH: We feel like we want to excel in natural gas transmission. Natural gas product transport and storage is really how we see ourselves, because those other products are products of natural gas. We’re not in oil. We’re not in gathering and processing. We’re not in marketing. Our niche is very narrow, and we’re very focused on it. That’s why we believe we excel at doing what we do. We strive to be a top-tier transmission and storage operator, and we feel like we are.

SS: Can you talk about your management ideology? How do you see yourself in that role?

SH: I want to lead, I want us to lead in innovation, which unlocks safe execution, reliability, sustainability and affordability. There are a lot of opportunities out in front of us to innovate and create an innovative culture through simplifying and reinventing our business, so we can achieve those four pillars I just mentioned—safety, reliability, sustainability and affordability. We really see, from a bottom-up standpoint, that innovation is going to drive us for the next 100 years. We want to continue to invent and simplify our business. We insist on high standards—standards in terms of safety, compliance, reliability sustainability—all those pillars that I mentioned. Then we deliver results. That’s how we’re focused, that we can deliver financial results to our shareholders, and then we can deliver strong business results for our employees and our customers.

SS: What led you to get into midstream?

SH: I grew up in a community in Ohio that was shaped by the economic benefit of natural gas. I was raised in a place where I saw with my own eyes the transformative impact of low-cost energy and what it meant from the people that produced it to the businesses that consumed it as low-cost energy. So, I saw that firsthand. It was formative to me when I was growing up.

Through what I studied in school, which was chemistry and environmental science, I wanted to come back to the industry to help improve the industry. It’s been a bit serendipitous that as I entered this space, looking for ways to improve how it operated and performed from an air emissions to spill standpoint to today, where our methane intensity and environmental footprint is a meaningful part of our business and a competitive differentiator, meaning the better we are at running our business, the more sustainable we are, the more that we can attract and grow our business.

It’s been very formative to me again, seeing the impact of low-cost energy, natural gas and then coming to the industry to help improve it to today, running a natural gas pipeline business where one of our key focuses is being sustainable and innovative.

SS: Boardwalk has a large Haynesville footprint. A lot of analysts have talked about how it could play a crucial role in the future, thanks to its proximity to the LNG corridor on the Gulf Coast. How do you see it?

SH: I would say the Haynesville is one of the top three most important and low-cost supply basins in this country, and the Haynesville will always be a relevant supply basin because of its access to serving LNG and power demand. We’re always going to be looking for ways to promote the growth of the Haynesville. I would say we’re also looking at other basins to continue to strengthen our country’s ability to access low-cost supply.

The Haynesville today is at about 15 Bcf. Depending on your view, it could plateau somewhere between 22 and 26 Bcf. I think it’ll continue to deliver supply, but the molecules get more expensive once you get above that plateau level. As a result, there’s going to be other supply basins that get called upon. When that plateau starts to form, we’re going to see others like the SCOOP/STACK get called upon, the Fayetteville.

Simultaneously, we’re going to watch, as an industry, the Permian continue to grow, but we’re also going to be looking for ways to create innovative outlets for the Marcellus. Today, the Marcellus production profile is capped because it doesn’t have takeaway capacity. Boardwalk is studying that issue and evaluating how we can help the Marcellus continue to grow through creating new and different takeaway options that don’t exist today.

SS: Attempts to build gas pipelines in the Northeast keep coming up short, like the Northeast Supply Enhancement attempt that was abandoned last year. You have a lot of assets connected to the Marcellus and Utica, but on the western side of the Appalachians. Is that area less opposed to development?

SH: I really appreciate this question because it’s a nuanced question, but it also goes back to my response earlier in terms of when you think about natural gas, it’s regionally received.

I was part of the pipeline project that you’re referring to, unfortunately, when I was at Williams. In the Northeast, it’s a much different conversation around the need for natural gas there—the disruption of a pipeline project versus talking about natural gas and the need for pipeline infrastructure in Ohio, in Kentucky, in Tennessee, in Indiana, in Louisiana and Arkansas. It’s a geography that is more inclined to see the economic benefit of natural gas versus the other negative views that other parts of the country associate with natural gas. That’s where we see Boardwalk being in a unique position to offer new takeaway options for producers in the Marcellus working in the geography where we operate, which is much more inclined to see gas as an economic opportunity rather than an environmental threat.

SS: Talking about pipeline opposition, a Boardwalk project was the subject of a lawsuit in Indiana that gained some attention. (In Citizens Action Coalition of Indiana v. Federal Energy Regulatory Commission, Boardwalk was contracted to build a line to a gas plant to retire a coal plant.) The judge started her ruling with, “As night follows day, an environmental challenge follows the approval of a natural gas pipeline.” What was your reaction? And how is the project going?

SH: The project is complete. It’s fully in service. If we’re not flowing gas yet, we’re getting ready to flow gas. We were really pleased with the circuit court decision—first of all, acknowledging the predictability of opposition to natural gas projects, as the quote alluded to, but also recognizing that there’s an overall environmental benefit to this power plant being fueled by natural gas rather than coal. So, we feel like this is an important decision. We hope that this is helpful and aids in other natural gas infrastructure decisions as a precedent. We feel like it should play that role, and so we couldn’t be more pleased with that outcome.

SS: Outside of business, you volunteer as a leader for the United Way of Houston.

SH: I think that business has the opportunity to drive significant social change and improvement, especially for those who are economically challenged.

We have a workforce that is blessed to have good jobs, high-paying jobs, and our workforce loves to engage in the communities where they live and work. We are part of the communities where our pipelines and assets exist, so we want to make sure that we’re reinvesting in those communities so that they know who we are, and we’re making those lives better. The United Way is a terrific way to provide the backbone support necessary for those in need.

On a personal note, I know that when people have one need, they typically have multiple needs. And that’s where the United Way is able to support on all fronts of an individual’s needs and get them on their feet and helping them thrive and stay there from a financial standpoint—not just giving them aid and then moving on. They support and help sustain individuals so that they can get back on their feet and live a full and thriving life.