Today marked the much anticipated startup of the REX Zone 3 Capacity Enhancement project, with nominations of about 200 MMcf/d, as seen in the figure below. The startup of the project is phased, as REX completes testing and commissioning of the remaining facilities, and will ultimately provide 800 MMcf/d of takeaway capacity from the region. A handful of additional pipeline projects have also come online since November including: Algonquin’s AIM project, Dominion’s Clarington and Lebanon West projects, and Columbia Pipeline Group’s Utica Access project. Production growth in the Marcellus and Utica will continue to hinge on the startup of incremental takeaway capacity, as the region remains constrained.
The REX expansion is the last material takeaway project slated to come online over the next six months. Next up would be Phase 1 of Rover if it meets its targeted start-up date, which is scheduled to come online in June. After Rover, 4.8 Bcf/d of additional takeaway capacity is officially scheduled to start up at the end of 2017, and 7.3 Bcf/d in 2018. The table below summarizes key regulatory timing for major takeaway projects.
Note both Rover and Leach Xpress have passed their scheduled date to receive their FERC Certificate of Public Convenience and Necessity. However, delays to receive the certificate are not out of the ordinary. For example, TETCO’s U2GC was scheduled to receive their certificate on November 19, 2014, but it was issued a month later on December 18, 2014. Rover has had issues with the demolition of a historic house which may be delaying decision on the certificate, as FERC is awaiting response from the Advisory Council on Historic Preservation, due in a few days. Rover in particular is on a tight schedule to receive the certificate so they may request to proceed with construction if they are to meet a summer 2017 start-up.
Given these delays and the regulatory risk involved with these infrastructure projects, BTU Analytics does not anticipate that all of these projects, particularly the large greenfield projects, will meet their targeted in-service dates. While the regulatory environment at the federal level may loosen under a Trump administration, the hang-up for projects has primarily been at the state level. The classic example is the Constitution pipeline project, which received its FERC certificate but was denied its water permit in New York, placing the project in “pipeline purgatory.”
Since the timing of when these takeaway projects actually come online will have critical impacts to production growth in the region over the next few years, BTU Analytics builds in pipeline delays into its production outlook. Further, the pace of growth in the region will have ramifications to the overall US natural gas supply/demand balance. The progression of these projects is therefore something we monitor very closely. For continued updates on Northeast infrastructure projects as well as in-depth analysis on the Northeast Market, check out the Northeast Gas Outlook and be sure to attend our upcoming, What Lies Ahead conference.
