Bluegrass Pipeline to Transport Marcellus, Utica Gas

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The Bluegrass Pipeline would add 200,000 bpd of mixed NGL take-away capacity in Ohio, West Virginia and Pennsylvania. The proposed pipeline could be increased to 400,000 bpd to meet further increased demand.The shale gas boom in the Northeast United States has constrained pipeline capacity in the region. A new joint venture by Williams and Boardwalk Pipeline Partners LP will seek to alleviate constraints with the development of a pipeline project to transport natural gas liquids from the infrastructure-constrained Marcellus and Utica shale plays to the expanding petrochemical and export complex on the Gulf Coast, as well as the developing petrochemical market in the Northeast.

The proposed Bluegrass Pipeline design would provide producers with 200,000 barrels per day (bpd) of mixed natural gas liquids (NGLs) take-away capacity in Ohio, West Virginia and Pennsylvania. The proposed pipeline could be increased to 400,000 bpd to meet market demand, primarily by adding additional liquids pumping capacity. It would deliver mixed NGLs from these producing areas to proposed new fractionation and storage facilities, which would have connectivity to petrochemical facilities and product pipelines along the coasts of Louisiana and Texas.
Williams and Boardwalk are also exploring development of a new export liquefied petroleum gas terminal and related facilities on the Gulf Coast to provide customers access to international markets.

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As proposed, the Bluegrass Pipeline would include the following:
• Constructing a new NGL pipeline from producing areas in West Virginia and Ohio to an interconnect with Boardwalk’s Texas Gas Transmission LLC system in Hardinsburg, Ky.
• Converting a portion of the Texas Gas system from Hardinsburg to Eunice, La. (the “TGT Loop Line”), from natural gas service to NGL service, including construction of new pump stations and related facilities.
• Constructing a new large-scale fractionation plant and expanding NGL storage facilities in Louisiana and a new pipeline connecting these facilities to the converted TGT Loop Line.

By combining new construction with an existing pipeline, Williams and Boardwalk officials believe that the Bluegrass Pipeline can be placed into service and begin serving customers sooner than other options. The companies are engaged in comprehensive project development planning including project design, cost estimating, economic and risk analysis, customer contracting, permitting and other legal and regulatory approvals and right-of-way acquisition. Williams and Boardwalk expect to sanction the project this year and place the planned project into service in the second half of 2015 assuming all necessary conditions are met.

“We are designing the Bluegrass Pipeline to provide these two world-class resource plays with access to one of the largest and most dynamic petrochemical markets in the world. In turn, this will help producers in Ohio, Pennsylvania and West Virginia achieve an attractive value for their ethane and other liquids,” said Alan Armstrong, president and CEO of Williams. “The current infrastructure challenge with natural gas liquids in the Northeast is slowing drilling and isolating liquids supplies from the robust markets in the Gulf that are poised to grow substantially over the next five years.”
Williams is one of the leading energy infrastructure companies in North America. It owns interests in or operates 15,000 miles of interstate gas pipelines, 1,000 miles of NGL transportation pipelines and more than 10,000 miles of oil and gas gathering pipelines. The company’s facilities have daily gas processing capacity of 6.6 billion cubic feet (bcf) of natural gas and NGL production of more than 200,000 bpd. Williams owns approximately 70 percent of Williams Partners LP, one of the largest diversified energy master limited partnerships. Williams Partners owns most of Williams’ interstate gas pipeline and domestic midstream assets.

Judging by the current market dynamics in the Northeast, existing liquids systems and local outlets will be overwhelmed by 2016, Armstrong added. Total NGL volumes in the Northeast are expected to exceed 1.2 million bpd by 2020. The Bluegrass Pipeline project would support Williams’ midstream assets in the region, offer an attractive return on investment and enable the company improve its status as an NGL infrastructure provider by linking the Utica and Marcellus region to petrochemical complexes on Gulf Coast.

Boardwalk president and CEO Stan Horton agreed with Armstrong, adding that the joint venture fits with the company’s plans and improves service to its customers.

“Our pursuit of this project is also consistent with Boardwalk’s long-term growth strategy of diversifying within the midstream energy sector and leveraging our newly-acquired liquids infrastructure assets at Boardwalk Louisiana Midstream, which provide a critical footprint for the downstream fractionation and storage portion of this project,” he said. “Another key element is that Texas Gas would connect its natural gas customers along the length of the converted TGT Loop Line to the remaining Texas Gas lines and will continue to provide them, and all of Texas Gas’ natural gas customers, with safe and reliable natural gas transportation service.”

Boardwalk Pipeline Partners is a midstream master limited partnership that provides transportation, storage, gathering and processing of natural gas and liquids for its customers. Boardwalk and its subsidiaries own and operate approximately 14,410 miles of natural gas and liquids pipelines and underground storage caverns with an aggregate working gas capacity of approximately 201 bcf and liquids capacity of approximately 18 million barrels. Boardwalk is a subsidiary of Loews Corp., which holds 55 percent of Boardwalk’s equity, excluding incentive distribution rights.

Sanctioning and completion of this project is subject to, among other conditions, negotiation and execution of definitive joint venture and related agreements; execution of customer contracts sufficient to support the project; and the parties’ receipt of all necessary approvals, including board approvals and regulatory approvals, such as antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act, approvals by the Federal Energy Regulatory Commission (FERC), among others. Before Texas Gas Transmission may begin converting the TGT Loop Line, it must receive abandonment authority from FERC. Boardwalk plans to file the abandonment application with FERC by May 1 and the abandonment process is estimated to take nine to 12 months.

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