On his September 8, 2011, speech on job creation, President Obama highlighted the importance of infrastructure to the U.S. economy, national security and competiveness as a nation. Repairing old and worn out infrastructure creates jobs and certainly helps maintain their viability. But, for America to leap ahead, we need more.

The U.S. needs to redefine the form, fit and function of the U.S. infrastructure and re-think financing, partnerships, business models and human-capital options. The approach is called, "Re-imagining Infrastructure." Simply put, the U.S. should re-imagine its old infrastructures as it did when it imagined the structures the first time.

A new vision is needed. The U.S. is locked into an obsolete pattern of dealing with infrastructure renewal at a time when population growth, technological advances and new energy sources have raced ahead. Going forward, the U.S. should re-imagine oil and gas infrastructure with the same critical thinking that has been outlined for other seen infrastructures (power, transportation, water systems). Relevant business models and new financing sources are needed to enable the whole system to work with the proper balance of centralized and decentralized functions, regulations and incentives, stakeholder engagement and government oversight.

The discovery of new sources of natural gas from shale deposits promises a dramatic positive shift in energy economics, but the extant infrastructure does not have either the reach or the capacity to deliver this new-found treasure to consumers. Moreover, the current infrastructure will only get more stressed as natural gas becomes the near-term fuel of choice for power generation across the country.

Consequently, the North American oil and gas midstream infrastructure capacity needs to be both improved and expanded to accommodate increased energy demand as well as the new production capacity from shale and other unconventional sources.

Many regions in North America require significant midstream investment to link the new oil and gas supplies to the market. This includes solving the natural gas liquids (NGLs) bottleneck at Conway, Kansas, as well as the crude oil bottleneck at the Cushing Hub in Oklahoma, which is enabling the wide regional West Texas Intermediate (WTI) crude oil price spreads.

Also, there is the growing need for NGL take-away and fractionation capacity from emerging liquids, in the Marcellus for example, where producers are creating ethane take-away solutions for use in petrochemical end-markets.

The Interstate Natural Gas Association of America (INGAA) estimated in June 2011, that to transport U.S. and Canadian production over the next 25 years, the U.S. needs an additional 43 billion cubic feet per day of natural gas transmission mainline pipeline (or 35,000 miles) capacity, about 1.3 billion cubic feet per day of natural gas gathering and processing pipeline (or 412,500 miles) capacity, and some 7 million barrels per day of NGL and oil transmission pipeline (or 32,500 miles) capacity.

The report says the greatest need for gas pipeline expansion is in the Southwest, followed by the Central, Southeast, and Northeast regions of the U.S.

NGL-heavy plays include the Eagle Ford in South Texas; parts of the Marcellus; the Utica shale formation in West Virginia, Ohio and Pennsylvania; the Bakken of North Dakota; and the Niobrara and Green River shale formations in Wyoming and Colorado. The largest areas of oil-production growth are expected in western Canada (mainly from bitumen and synthetic crude from oil sands) and the U.S. Rocky Mountains.

The INGAA report also estimates that the U.S. and Canada will need to invest more than $10 billion per year (81% natural gas, 13% oil and 6% NGL) through 2035, to develop new transmission, gathering and lateral pipelines and associated processing and storage facilities to facilitate this oil and gas production growth—much of this by master limited partnerships.

The U.S. faces staggering challenges with increased demand, skilled workforce shortfalls, aging distribution pipelines, and difficult environmental and regulatory requirements. Because of this, the track record for funding, repairing and increasing oil and gas pipeline capacity has proven vexing.

The U.S. spends less than 2% of its gross domestic product on infrastructure, while China and India, admittedly starting from a much lower base of fixed assets, are spending 9% and 5%, respectively. The U.S. underinvestment has not been caused by simply a lack of money, however. We have money to fund major projects, especially when we take into account new financing models and the vast private capital that can be unleashed. So, it's not just the money nor is it any significant deficits in technology, skill or know-how. How can we make it right?

A four-step solution

Four steps in the path forward for renewing infrastructure can be taken.

First, infrastructures are complex networks of people, processes and technology that range across multiple jurisdictions to deliver a needed end-service. It helps to view this network as a complex system having multiple, interdependent layers ranging from its physical components at the foundation to its purpose at the top. Surrounding the layers are communities of stakeholders, each with their own interests and motives.

Re-imagination requires optimizing and integrating all these layers as a unified whole and effectively engaging the stakeholder communities, convincing them to take the long view and move beyond their near-term self-interest. When we speak of the U.S. oil and gas infrastructure today, we often only address one or two layers at a time (e.g., physical assets).

Second, the U.S. needs a set of design principles that accommodate future technological change and the new needs of citizens. These qualities don't emerge by accident; they must be designed in.

One important means of accelerating infrastructure adaptability is modularity within an open architecture design. Modularity allows the larger infrastructure system to adapt to changing conditions without disrupting its function as a whole. Building in resilience is more effective than managing risks, but it introduces additional cost without initially appreciating the benefit of the investment—that is, until it is needed.

Another design consideration is sustainability. Sustainable infrastructure benefits the environment, the economy and social wellbeing, now and for future generations. These design principles need to be developed with input from all relevant stakeholders to succeed.

Third, stakeholder communities are wired to pursue their own self-interests. It is the leadership's job to broker a functional common ground by which stakeholders can align their interests with the common good. There is no invisible hand that will make this happen by itself. A new engagement type, known as a "megacommunity," recognizes that complex problems and transformational projects cannot be solved by a single organization or a circumscribed group of stakeholders. All sectors must participate: business, government and civil society.

The idea of a megacommunity is critical—forming an expansive, self-sustaining network that puts people with the right resources in the right place at the right time. A megacommunity is not just another term for a public-private partnership. A public-private partnership focuses on a relatively narrow purpose and is formed, governed and constrained by a static legal agreement. A megacommunity is a sphere in which stakeholders voluntarily join together around a compelling issue of national importance and follow a set of practices and protocols that make it easier for them to achieve results.

Fourth, a national vision that brings together a definition of the U.S. long-term needs is required, as well as a policy framework that integrates the separate but interdependent policies (e.g., energy, environment, etc.).

Also, stable financing is needed throughout the renewal lifecycle. More stability in long-term funding, performance requirements and policy leadership is needed. Developing a clear vision is the sine qua non. The magnitude of the challenge faced requires bold thinking and the mobilization of the U.S. national political will. A national vision would provide an explicit road map that sets priorities. Each of the U.S. infrastructures is governed independently, but many are mutually dependent.

To that end, a presidential commission should be launched (comprised of members of the executive branch, congress, state and local governments, the private sector, universities, nonprofit organizations and associations) to formulate major recommendations for action. This commission should convene several national forums to elicit broad stakeholder involvement and build momentum for the long-term campaign at hand.

The monumental achievements of the U.S. past were made possible by a clear vision and focused effort on a national scale. Such a vision will be a critical first step in creating the stable foundation for a modern America.

Incentives matter

Vision is vital but not sufficient. An accompanying regimen of laws, regulations and incentives at the federal level may be necessary to induce the integrative changes needed. Given that the U.S. Congress itself is segmented by its committee structure, a special congressional infrastructure committee could ensure integrated policy and long term budget formulation.

National infrastructure legislation will need to set new integrated policy mandates, authorize a range of financing approaches, define new agency responsibilities, provide oversight and target specific appropriations. Coordinated legislative enactments need to create a menu of approaches for infrastructure development by federal agencies, states, localities, utilities and the private sector. One size will not fit all, and it is imperative that policies, programs and funding mechanisms remove barriers and create meaningful incentives for bold action by all of these stakeholders.

Above all, a new unified approach must provide a framework in which the private sector is incentivized to invest in the U.S. nation's infrastructure. The action plan will require regulatory reform to deliver more impact from existing grant funds and formulas, while enabling and leveraging the use of significant private capital. Specific areas of focus for regulation should consider integrated grant funding that spans across agencies and private sector investment that reflects service- and performance-based projects where it is recognized that the low-cost approach is not necessarily the best long-term value.

Some strategies, as proposed by the National Petroleum Council, offer step-change potential. These include establishing councils of excellence (stakeholders) addressing environmental, safety and health practices, and corporate commitment to prudent development that includes environmental performance, such as reducing methane emissions.

The economic health, national security, national competiveness, and quality of life all depend on the nation's ability to modernize and expand infrastructures. This is especially true for America's oil and gas distribution infrastructure, given the projected increases in oil and gas demand and the new found domestic sources of their supply.

Mark Gerencser is an executive vice president at Booz Allen Hamilton, where he advises the government, private and non-profit sectors on how to create and sustain megacommunities to solve complex problems in infrastructure development, enhancement and renewal. Tina Vital is an associate at Booz Allen Hamilton with 25 years of experience in the energy industry.

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