Two major pipeline projects are in the works to ship natural gas from the Marcellus and Utica shales to the southeastern U.S., a region with a growing appetite for natural gas.
Downtown-based EQT Corp. said Tuesday it is moving forward with its partner NextEra Energy, a Florida electric utility, to form a joint venture dubbed Mountain Valley Pipeline LLC. The partnership plans to build a 330-mile pipeline that would provide at least 2 billion cubic feet per day (Bcf/d) of transmission capacity to the mid-Atlantic and South Atlantic regions. The project, which is now seeking firm commitments for capacity from shippers during an open season, was first announced in June, and has already gotten commitments for 1.5 Bcf/d, EQT said.
Meanwhile, a partnership of four energy companies — Dominion, Duke Energy, Piedmont Natural Gas and AGL Resources — also announced Tuesday a roughly $5 billion pipeline project to take about 1.5 Bcf/d to North Carolina and Virginia. The Atlantic Coast Pipeline would span 550 miles from Harrison County, W.Va., through Virginia and then south to North Carolina.
The southeastern U.S. is hungry for more natural gas. Not only is the region’s population — and, thus, consumption — growing, but power plants are also seeking out natural gas as an alternative to coal-fired power generation.
Since the shale boom, natural gas prices have fallen and become more competitive with coal. And now, new federal mandates limiting carbon emissions mean more utilities are closing down coal plants, which have higher greenhouse gas emissions, or converting plants to run on cleaner-burning natural gas.
Atlantic Coast Pipeline
There are three drivers behind the Atlantic Coast project, said Jim Norvelle, spokesman for Dominion.
“One is demand for natural gas from companies like Duke Energy, which are closing coal plants and converting coal-fired power stations to natural gas,” Mr. Norvelle said. Another is local natural gas distribution companies like Charlotte, N.C.-based Piedmont Natural Gas that are serving a growing population of customers. In addition, Dominion is “seeing economic development possibilities from industrial customers, or ones looking to build in the South but have been restricted because of a lack of natural gas,” Mr. Norvelle said.
At the moment, North Carolina is served primarily by a single major wholesale interstate natural gas pipeline, Williams’ Transco Pipeline, which runs through the western portion of the state.
The ownership stakes in the Atlantic Coast project are Dominion with 45 percent; Duke Energy, 40 percent; Piedmont, 10 percent; and AGL Resources, 5 percent.
Affiliates of all four companies plan to be customers of the pipeline under 20-year contracts, pending regulatory approvals. North Carolina-based PSNC Energy also plans to be a customer of the pipeline under a 20-year contract, pending regulatory approvals, according to Dominion.
Dominion plans to make a pre-filing request with the Federal Energy Regulatory Commission this fall on behalf of Atlantic Coast Pipeline. It expects to file its FERC application in summer 2015, receive the FERC Certificate of Public Convenience and Necessity in the summer of 2016, and begin construction shortly thereafter.
If approved, the project is slated to go into service in late 2018.
Mountain Valley Pipeline
Mountain Valley also is expected to be in service during the fourth quarter of 2018. Subject to FERC approval, the 330-mile pipeline will connect the existing Equitrans transmission system in West Virginia, to the Williams’ Transcontinental Gas Pipeline Company, or Transco, station in Virginia — “a highly marketable trading area for the southeast region,” EQT said Tuesday. EQT said it will operate the pipeline and own a majority interest in the joint venture.
“As we move into a binding open season, securing the 1.5 Bcf per day of firm capacity confirms we have an economically viable project. Marcellus and Utica producers will have cost-effective access to the growing demand for natural gas for use by local distribution companies, manufacturers, and power generation facilities,” Randy Crawford, senior vice president, EQT Corp., and chief operating officer, EQT Midstream Partners, said in a statement Tuesday.
The binding open season is scheduled to end Sept. 29, at which time the final project scope will be determined, EQT said.
“This is an exciting opportunity to invest in a high-quality natural gas pipeline that we expect to be fully contracted for the next 20 years,” said TJ Tuscai, president, NextEra US Gas Assets. “This project is expected to support production growth and physical takeaway capability in the Marcellus and Utica and provide new markets to producers and shippers in the region. In addition, customers in the southeast United States should benefit from a new reliable supply source.”
According to the American Gas Association, a trade group, 1,000 cubic feet of natural gas is about enough to meet the natural gas needs of an average home for four days. Five trillion cubic feet of natural gas is enough to meet the needs of 5 million households for 15 years.
Current natural gas demand in the South is about 14 Bcf/d to 15 Bcf/d, according to Bentek Energy, an analytics and research firm based in Denver. The firm forecasts that demand in the South, excluding Virginia, will grow by another 6 Bcf/d between now and 2019. Of that, the power generation sector represents about 1 Bcf/d. Another 3 Bcf/d to 4 Bcf/d is expected to come from proposed exports of liquefied natural gas from the nearby Gulf Coast.
Swami Venkataraman, vice president and senior credit officer for Moody’s Investor Service, who covers Dominion, sees the Atlantic Coast project as a unique step in the development of the Marcellus Shale.
Historically, natural gas has flowed from the Gulf Coast to the rest of the country, but the Marcellus boom of abundant gas supply in Pennsylvania, Ohio and West Virginia means pipelines are now being built in those states to serve demand centers. However, Marcellus pipeline construction is playing catch-up to soaring shale production. The pipelines that have been proposed to ship Appalachian gas out of the region have been driven by drillers trying to get their product to market.
“You have [natural gas] producers operating in the Marcellus and Utica, which may not be the largest or most credit-worthy customers since they’re smaller,” Mr. Venkataraman said. “A lot of the pipelines built in the region are meant to support these producers.
The Atlantic Coast project “stands out in that it is not producer-driven. It is demand-driven and underpinned by solid, highly rated utilities,” he said.
“What’s happening in Marcellus is the exception to the rule, because it’s grown so much, so fast, producers are pushing to get the gas out of the ground,” Mr. Venkataraman said. “This is a return to the style of demand-driven pipelines.”
Stephanie Ritenbaugh: email@example.com or 412-263-4910.