FERC approves Constitution pipeline to move Marcellus gas northeast

Greg Gethard,
UOGR Contributor

The Marcellus and Utica natural gas plays have made headlines for years, but moving the gas to end users to the East has not been easy due to a limited pipeline capacity.

The Federal Energy Regulatory Commission has approved Constitution pipeline. Several other pending projects also seek to deliver Marcellus-Utica gas to customers in the Northeast, a region growing more dependent on gas for electric power generation.

The Northeast's growing gas demand was made clear during the severe winter of 2013-14. According to a primer from the New York Independent System Operator-manager of New York's power grid-regional gas demand reached record levels in January 2014, prompting a rise in gas prices, which was passed on to electricity customers.

New England's electricity market also experienced rising electricity prices, and has continued to do so throughout this past year. Experts say electric prices rose because of changes in New England's electricity generation model. Environmental mandates have forced power plants to move away from coal.

These changes are not limited to New York and New England. Terry Boston, the president and chief executive officer of PJM Interconnection, which manages the power grid for the Mid-Atlantic region, described the changing formula of power sources as "the world's largest and fastest fuel switch" at a 2014 conference.

Boston predicted that in May 2015, PJM's use of gas will surpass coal in its fuel mix. Currently, PJM's capacity is 40% coal, 30% gas, 19% nuclear, and 11% other. But the move to gas is changing those figures, Boston said.

FERC approves Constitution

Constitution Pipeline, a 124-mile pipeline, received approval from the Federal Energy Regulatory Commission early in December with hopes to start in 2015. The $700 million project is a joint project between several partners.

Williams Partners LP will operate the pipeline. Cabot Oil and Gas Corp., Southwestern Energy, Piedmont Natural Gas, and WGL Holdings Inc, all signed agreements to supply gas.

Constitution Pipeline will transport 650,000 dekatherms/day of Marcellus gas through the northeastern part of Pennsylvania to an interconnection near Albany, New York. Constitution then will link with Iroquois Gas Transmission's system to move gas southbound through Connecticut, across the Long Island Sound, before ending at a station in Hunts Point north of New York City.

Iroquois is a partnership between TransCanada Pipelines Ltd., Dominion Resources, Inc. National Grid, the New Jersey Resources Corp., and Iberdola, USA.

Constitution could also link with Kinder Morgan's vast Tennessee Gas Pipeline, which will transport Marcellus gas to both the New York and Boston markets.

Kinder Morgan has started FERC's pre-filing process for a proposed $6 billion Northeast Energy Direct (NED) system that could bring up to 2.2 bcfd into New England.

Kinder Morgan plans on starting operations on NED in 2018, but faces a steep uphill battle as environmentalists and other activists have voiced strong opposition to the project.

Thomas Martin, Kinder Morgan vice-president, said in a 2014 conference call that the company has received a "good mix of customer interest" with utilities, power generators, and some Canadian customers indicating their willingness to be potential consumers.

Expansion Projects

But it's more than just new pipelines that could forever change the northeastern gas market.

The Northeast Gas Association, a regional trade association comprising distribution and transmission companies, among others, lists 20 pipeline expansion projects that have been publicly announced.

One project under works is the "Rockaway Lateral" operated by Williams. The project calls for construction of a 3.2-mile lateral. The project could provide 647,000 dekatherms/day of gas to National Grid's distribution systems in Brooklyn and Queens.

Williams also has designs on other expansion projects in the region. Its Diamond East project could bring up to 1 bcfd of new gas transportation capacity by linking the Marcellus region to a station along the Transcontinental System's line in New Jersey.

The PennEast Pipeline Co.-jointly owned by AGL Resources, New Jersey Resources, South Jersey Industries, and UGI Corp.- also has considered a similar path. It has proposed construction of a 100-mile pipeline starting in the Marcellus region and ending at a Transco interconnection in New Jersey.