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Kinder Morgan Seeks Approval for Northeast Energy Direct

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A Kinder Morgan subsidiary has filed for federal approval of a $5 billion project to expand natural gas pipeline capacity in the Northeast United States. Tennessee Gas Pipeline Co. LLC (TGP) filed a certificate application with the Federal Energy Regulatory Commission (FERC) on Nov. 20 for the proposed Northeast Energy Direct (NED) project.

“The NED project is a transformative project for the northeast United States,” said Kimberly S. Watson, president of Kinder Morgan East Region Natural Gas Pipelines. “Despite being just a few hundred miles from the most abundant and low-cost natural gas production area in the country, consumers in the Northeast pay some of the highest natural gas and electricity rates in the continental United States. These higher prices are due, in large part, to natural gas pipeline infrastructure that is insufficient to meet the winter heating demand of local distribution companies (LDCs) and electric generators.”

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The NED project will expand TGP’s existing pipeline system in Pennsylvania, New York and New England and connect low-cost natural gas supplies from northern Pennsylvania to New York and New England markets.

On July 16, Kinder Morgan announced its board of directors authorized TGP to proceed with the Market Path component of the NED project and a $3.3 billion investment. A determination has yet to be made by the board on approving the Supply Path component and associated capital.

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Market Need

Watson said that the NED project will ease natural gas capacity constraints and provide energy consumers in the region with lower prices on natural gas and electricity in coming years.

“In order to meet demand during the past two winters,” Watson said, “New England’s electric generators have had to rely on high-priced natural gas, expensive imported LNG and costly fuel oil purchased on the spot market. In short, New England has insufficient natural gas pipeline capacity serving the region.”

One study found that the 2013-2014 “Polar Vortex” winter resulted in record high and volatile gas prices, which had a direct impact on wholesale power prices.

“The study concludes that, had the NED project been in service during the winter of 2013-2014, the additional pipeline capacity would have eliminated gas and electric price spikes on 86 days during the 2013-2014 winter and reduced wholesale electricity expenditures by New England’s business and residents by $3.7 billion,” Watson added.

RELATED: Study Outlines New England’s Need for Added Natural Gas Capacity

Over 15 years, New England has steadily increased its reliance on natural gas-fired electricity generation. In 2000, approximately 15 percent of New England’s power came from gas-fired generation. Today the total stands at almost 50 percent.

“As natural gas has become the baseload fuel for electricity generation in New England, the interstate pipeline system in New England has not been significantly expanded to supply this load,” Watson said. “The NED project is the solution.”

Project Facilities

The NED project comprises two components, the Supply Path and the Market Path. The Supply Path component will have a maximum design capacity of 1.2 billion cubic feet per day (Bcf/d) and consist of approximately 133 miles of 30-in. diameter pipeline extending from TGP’s existing 300 Line system in northern Pennsylvania to an interconnection with TGP’s 200 Line system and Iroquois Gas Transmission System at Wright, New York, and approximately 41 miles of 36-in. diameter looping pipeline along TGP’s 300 Line in Bradford and Susquehanna counties in Pennsylvania.

The Supply Path component also will include the construction and operation of one modified and three new compressor stations and two new meter stations.

The Market Path component will have a maximum design capacity of 1.3 Bcf/d and consist of approximately 188 miles of 30-in. pipeline extending from Wright, New York, to Dracut, Massachusetts, five delivery laterals in Massachusetts and New Hampshire and one pipeline loop in Connecticut.

The Market Path component also will include the construction and operation of six new compressor stations and 27 new and modified meter and regulator stations.

The Market Path component facilities will be owned by Northeast Expansion LLC, a joint venture between Kinder Morgan Operating Limited Partnership A, Liberty Utilities (Pipeline & Transmission) Corp. and UIL Holdings Corp. TGP will construct the Market Path component facilities on behalf of the Northeast Expansion joint venture.

Capacity Commitments

The NED project has significant market support as evidenced by the executed precedent agreements to date with various project shippers for transportation service on both the Market Path and Supply Path components. Currently, TGP has executed precedent agreements with seven New England local distribution companies (LDCs) and other market participants for firm transportation service on the Market Path component facilities for about 552 million cubic feet per day (MMcf/d). The Massachusetts Department of Public Utilities and New Hampshire Public Utilities Commission recently approved TGP’s precedent agreements with the LDCs in these states.

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For the Supply Path component, TGP has also executed precedent agreements with various market participants, including four New England LDCs that have subscribed on the Market Path component facilities, as well as two natural gas producers, one municipal light department and a power generator for a about 752 MMcf/d of firm transportation capacity.

TGP representatives believe that these agreements demonstrate the strong market demand for the NED project pipeline capacity. The company is confident it will secure additional contractual commitments and is in ongoing negotiations with additional potential project shippers. As additional agreements are executed, TGP will supplement information for the FERC record.

Proposed Schedule

To ensure timely construction of the NED project, and in order to complete land acquisition and environmental and cultural resource surveys, TGP requested that FERC issue requested certificate and abandonment authorizations during the fourth quarter of 2016. Subject to regulatory approvals, TGP expects to begin construction in January 2017, with an in-service date of Nov. 1, 2018.

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