This is from a working paper that analyzes the regulatory distortion in investment incentives within the United States natural gas pipeline network. The authors develop and estimate a structural model to compare the marginal social value of pipeline capacity—tied to regional gas price differences—against the financial incentives of firms operating under fixed rate-of-return regulation. The paper finds that firms' incentives to invest frequently exceed the social value of capital, emphasizing the critical role of the costly regulatory approval process as a secondary tool to control investment and prevent overcapitalization. Ultimately, the authors suggest a welfare-improving reallocation of regulatory costs, recommending streamlining approval in the Northeast while tightening scrutiny in the Southeast and Mountain West regions to address a persistent spatial misallocation of capital.