Gas Pipeline Costs Run Higher, Again

February 1st, 2019 |

On Friday Dominion Energy Inc. (NYSE: D) announced that the expected in-service date of its 1.5 Bcf/d Atlantic Coast Pipeline (ACP) has been pushed to early 2021. In addition to this delay, cost estimates for the pipeline have risen to $7-7.5 billion, up considerably from its FERC estimate of roughly $5.1 billion and more recent estimates of $6.5-7 billion. The 600-mile pipeline connecting gas-producing assets in the Marcellus and Utica shales to the Eastern Seaboard had an expected in-service date in 2020 prior to Fridays’s announcement. With Rover, Nexus, and Atlantic Sunrise coming into service, ACP and Mountain Valley Pipeline (MVP) now have the market’s attention as the next major projects impacting Appalachian takeaway and production.

The delay and ensuing increased costs are the result of environmental lawsuits prompted by fervent grassroots opposition. The U.S. Fourth Circuit of Appeals ruled in favor of a preceding court’s verdict opposing Dominion’s U.S. Forest Service permits that would allow ACP to cross the Appalachian Trail and national forests. Disdain for fossil fuels in the East Coast’s political environment is a challenge midstream companies have faced for quite some time in the Northeast, a topic BTU commented on in our previous commentary on gas pipeline costs.

The table shown above displays the updated ACP project costs compared to FERC estimates for other major pipeline projects. BTU Analytics has updated the costs for the MVP and ACP with recent official estimates as they continue to face delays related to legal decisions. On a cost per mile basis, MVP remains the most expensive pipeline at $15.1 million/mile. Using the midpoint of ACP’s new price range, $7.25 billion, marks a 43% increase over the FERC estimate, securing the third highest incremental cost per mile slot.

Unrelenting challenges in the East include concerns for the preservation of the region’s environmental wonders, densely populated urban areas, and a growing sentiment of “not in my backyard” when it comes to energy infrastructure. When does BTU Analytics expect MVP and ACP to come into service? How will infrastructure delays impact the pricing of gas molecules from the wellhead to burner tip? If you’re curious about changing natural gas market dynamics, register for BTU Analytics’ free webinar on February 5, 2019. To keep up with the latest impacts of current events on natural gas markets, check out our upcoming Gas Basis Outlook product.

Author: Hamp Smith

Hamilton (Hamp) Smith is an Energy Analyst at BTU Analytics, focusing on the publication of BTU’s E&P Positioning Report. He also oversees oil and gas production forecasting for the Rockies. Prior to joining BTU Analytics, he was a hydraulic fracturing field engineer at BJ Services. Hamp holds a B.S. in Petroleum Engineering and M.B.A. in Energy Management, both from the University of Wyoming.