Natural Gas Distribution

The 2,400 natural gas local distributors in the US supply gas for residential usage, commercial usage, industrial usage, and electric power generation. The operations and financial performance of a natural gas distributor are highly dependent on the regulatory structure in which the company operates.

Threat of Accidents Due to Natural Disasters or Terrorist Acts

Natural disasters are always a threat to assets and operations.

Gas Consumption Growth Depends on Pipelines

Natural gas has helped reduce reliance on coal for electricity generation.

Jul 26, 2026 - Permian Oil Drilling Leads to Natural Gas Glut

• The Wall Street Journal reports that rising oil prices could accelerate drilling in the Permian Basin and again overwhelm the region's natural gas pipeline capacity. Gas prices at the Waha hub averaged negative $2.19 per million British thermal units in the first half of 2026 and fell to a record negative $7.95 in April as producers paid customers to take excess supply. Natural gas is a byproduct of oil drilling. New pipelines have improved prices, but Permian gas remains about 40% below the national benchmark. Analysts expect planned oil drilling to quickly fill the added capacity, potentially forcing producers to curtail output, redirect rigs, or expand local gas use. The bottleneck could affect national energy markets because the Permian supplies about 20% of US natural gas and supports power generation, manufacturing, liquefied natural gas exports, and data center growth.
• FMI's 2026 Energy and Power Overview forecasts continued growth in natural gas infrastructure, driven by rising electricity demand, LNG exports, and Permian production, which increases the need for pipelines, compression, processing, and storage. Gas-related work now accounts for more than 90% of oil and gas construction spending, which FMI expects to grow by about 6% annually. Natural gas distributors could benefit from dedicated pipeline connections for data centers using on-site gas generation, especially in Texas, Northern Virginia, and the Southeast. Aging infrastructure will also sustain replacement and modernization work as operators remove cast iron and bare steel pipe, improve monitoring, reduce methane emissions, and strengthen reliability. However, permitting delays, limited interconnection capacity, higher interest rates, price volatility, and selective capital markets could slow major projects and increase scrutiny of costs.
• Fitch Ratings raised its 2026 outlook for the North American midstream energy sector to improving from neutral, citing stronger domestic and international demand for hydrocarbons, elevated commodity prices, and expanding investment. Although price and export gains linked to the Iran conflict may be temporary, prolonged volatility could benefit infrastructure serving crude oil, LNG, and natural gas liquids exports. Higher capital spending is increasingly focused on natural gas, LNG, power generation, coal-to-gas switching, and AI-driven electricity demand. This growth could increase throughput and supply availability for the natural gas distribution industry, but project delays, cost inflation, or weaker financing conditions could constrain capacity additions.
• Pipeline & Gas Journal reports that the Federal Energy Regulatory Commission has proposed sweeping changes to streamline its natural gas permitting process and accelerate approvals for pipeline, LNG, and other energy infrastructure projects. The reforms would expand eligibility for blanket certificate authorization, allowing more interstate natural gas facilities to proceed without case-by-case review. FERC also proposed raising the program's project cost limits to encourage faster investment and construction. This effort follows a 2025 Notice of Inquiry seeking industry input. Separately, the commission extended temporary cost limit waivers through May 31, 2028. FERC said it is also reviewing broader permitting updates for LNG and hydroelectric projects to improve efficiency, reliability, and long-term US energy infrastructure development.

Industry size & Structure

A typical local distribution company has 48 employees and annual revenues of $73 million.

• About 2,400 local distribution establishments provide natural gas distribution services in the US and employ 116,100 workers.
• The natural gas distribution industry is concentrated with the 20 largest firms representing 65% of revenue.
• Large natural gas distribution firms include: ATMOS Energy, NiSource, New Jersey Resources, and Energy Transfer.
• Entry into the business is difficult as a built out pipeline infrastructure (valued in the billions of dollars), approval of the public utility commission, and a demonstrated competence in safety and environmental compliance is required to provide service.