TC Energy recently announced a non-binding open season from April 4th, 2022, to May 6th, 2022, to assess interest in an expansion of the Northern Border Pipeline (NBPL). The Bison Express project would add 0.43 Bcf/d of capacity on NBPL and utilize the existing but empty Bison Pipeline to connect Bakken volumes to Cheyenne hub in the Rockies. Today’s Energy Market Insight will look at the drivers of this project and the potential impacts to Canadian and Rockies producers from the expansion.
The capacity boost on NBPL would be achieved through horsepower additions to compressor stations 4,5, and 6 located in North Dakota. The capacity expansions in North Dakota would allow NBPL to deliver 0.43 Bcf/d into Bison pipeline, and then with additional facility modifications on Bison, allow the gas to flow down into the Eastern Rockies. From there, Bison would deliver the volumes to Fort Union and Fort Union would deliver the gas onto WIC. WIC would then give producers access to Cheyenne Hub and outlets east and west of Cheyenne Hub. TC Energy has proposed a relatively conservative timeline for this project with an expected in-service date of 1Q 2026 given the ongoing regulatory challenges for FERC regulated projects. The map below highlights the route for the expansion.
In 2010, the Bakken produced just 0.3 Bcf/d of residue gas production but in March 2022, prior to the winter storms in April, was estimated to be producing 2.3 Bcf/d of residue gas production. The growth in the Bakken over the last decade has led to significant displacement of Canadian volumes off Northern Border Pipeline and the Bakken is expected to continue to grow over the next several years. BTU Analytics estimated in BTU Analytics April Upstream Outlook that the Bakken will grow nearly 0.4 Bcf/d by 2026, the expected start date of the Bison Xpress project. The chart below shows the current flows on Northern Border just downstream of the Williston Basin.
As shown in the chart above, Bakken growth has been displacing Canadian volumes off Northern Border Pipeline and only about 0.9 Bcf/d of the 2.5 Bcf/d flowing on the pipeline comes from Canada YTD 2022. The jump in Canadian volumes during April 2022 was the result of late season blizzards shutting in Bakken volumes. While the expansion of NBPL pipeline would only occur in North Dakota, this expansion would boost capacity and divert Bakken volumes down Bison. With Bakken natural gas production expected to grow over the next several years, this expansion would help prevent further displacement of Canadian volumes once in service. While Bakken producers may not need the expansion capacity explicitly given there is still Canadian volume that could be displaced, the expansion does offer shippers access to a new market in Cheyenne Hub.
Cheyenne Hub in the Rockies would offer Bison Xpress shippers access to pipelines that could take Bakken volumes either east to the Midcontinent or west towards the Wamsutter and Opal markets. The below chart shows aggregated historical flows on the pipelines (REX, TIGT, CIG, Trailblazer, Southern Star, and Cheyenne Plains) moving gas from the Rockies to the Midcontinent.
Total volumes flowing east out of Cheyenne Hub have been in decline over the last several years with volumes declining from an average of 4.5 Bcf/d in 2010 to an average of just 1.6 Bcf/d in 2021. The decline in volumes flowing east corresponds with a drop in investment in non-oil plays and subsequently production volumes in the Western Rockies. This winter even saw for the first time flows to the Midcontinent reverse with volumes being imported into the Rockies. Cheyenne Hub has also become a focal point for supplying the Western Rockies during the Winter as show in the chart below.
The declines in production across Eastern and Western Rockies have not been equal with Western Rockies production declining significantly due to the lack of oil plays in the region. This decline in supply, combined with gains in natural gas demand due to coal and nuclear retirements, and increased exports to Mexico from the Southwest have created a strong pull to move gas from Cheyenne Hub to Wamsutter and ultimately to the Western US markets.
If Western Rockies natural gas production continues to decline, then the volume from Bison Xpress could find new markets in need of supply. However, the current price regime for natural gas and oil certainly supports a return to drilling in the region. This return in activity, though, is compounded by regulatory challenges at both a state and federal level. Colorado has enacted new policies limiting and slowing the pace of permitting in Colorado while plays in Wyoming and Utah sit almost exclusively on BLM land. For more on the outlook and impacts of the Bison Xpress project, check out BTU Analytics upcoming Gas Basis Outlook product for in depth analysis on North American natural gas basis pricing and regional supply and demand balances.