Natural Gas Infrastructure Development in Focus to Support Shift from Traditional Supply and Flow of Gas

Last year we started our discussion of the developing shift in flow of natural gas from the traditional South-to-North/West-to-East path to a North-to-South/East-to-West path as a result of the abundance of natural gas now being produced out of the Marcellus and Utica Shale regions.  We highlighted the impact that this reversal in gas flow would have on traditional pricing considerations and end users of the pipelines transporting gas from the Northeast.  You can read our “Going With the Flow” series here and here.  As the trend becomes more of an industry norm, we have seen increased investments into building out the infrastructure necessary to support this shift in gas flow.  Billions of dollars already have been committed to begin the transition to a supply system in which natural gas from the Northeast can efficiently service other locations in the nation.

Throughout the year, there have been steady reports of natural gas and LNG (liquefied natural gas) companies seeking to invest in the construction of pipelines to transport gas from the Northeast to service the South and West and/or to otherwise support bi-directional flow on their pipelines.  One of the most recent of such pipeline projects is the $5 billion Atlantic Coast Pipeline to be constructed by Dominion, Duke Energy, Piedmont Natural Gas, and AGL Resources, which will run from West Virginia, through Virginia and into eastern North Carolina.  In announcing the pipeline project, the companies stressed the need for North Carolina to diversify its sources of natural gas and the benefits attendant to sourcing gas from the Northeast:

Today, North Carolina is served primarily by only one major interstate natural gas pipeline that traverses the state’s western and central regions, transporting natural gas largely from the Gulf Coast region.

To enhance reliability and energy security, Duke Energy’s and Piedmont’s solicitation sought proposals for a new, second natural gas pipeline that would transport additional large-scale supplies – from different sources – into the state.

The Atlantic Coast Pipeline will meet those objectives by … transporting gas from a different natural gas source – the Utica and Marcellus shale basins located largely in West Virginia, Ohio and Pennsylvania.

The anticipated impact on consumers: “The expanded source of gas will also help fuel economic development across the region as businesses and homes rely more on natural gas….The project will also provide more reliable access to new sources of natural gas, keeping consumers’ energy costs down – even during the coldest and hottest weather.”  The $1 billion PennEast Pipeline project recently announced that PSE&G is joining the effort to build a pipeline that will transport gas from the Marcellus Shale into New Jersey, with the similar expectation that “nearly all major market centers in New Jersey will benefit from this direct connection to reliable and affordable Marcellus Shale gas from Pennsylvania.”

Natural Gas infrastructure development projects consistently are being submitted to the Federal Energy Regulatory Commission for the agency’s approval. For example, in June alone:

• Rockies Express requested authorization to construct a project that will provide east-to-west capacity in OH, IN, IL, and MO,
• ET Rover started the pre-filing process to construct a pipeline project that will provide capacity produced in OH, PA, and WV to markets in the Midwest, and
• Equitrans started the pre-filing process to construct a project that will provide capacity produced in WV and PA to pipeline interconnections in OH.

Earlier this year, Equitrans was authorized to build an expansion project that will provide capacity on its PA system for delivery to the Northeast.  Also, Elba Liquefaction, Southern LNG, and Elba Express sought approval to build pipeline facilities to expand Elba Express’s system and to provide north-to-south flow.  Texas Eastern sought approval to build a project that will provide firm capacity from its Uniontown Compressor Station in PA to Panhandle Eastern in IN, and sought approval to build its Ohio Pipeline Energy Network Project with reverse flow capabilities to deliver gas from the Utica and Marcellus Shales in Ohio to the Gulf Coast region.  Texas Eastern also received authorization in February for its TEAM 2014 Project, which will provide 600 MMcf/d of transportation capacity on its Penn-Jersey system for delivery to the Midwest and Southeast.

These are just a few among the many infrastructure projects that are planned/underway.  It has been projected that Marcellus Shale production may support up to 10 Bcf/d of reversed pipeline flows to the South by 2015.  We can expect substantial investments in infrastructure development to continue, as we go with the new flow of the natural gas industry.