Tennessee Gas Pipeline Files Certificate Application for Its Proposed Northeast Energy Direct Project

Tennessee Gas Pipeline Company, a Kinder Morgan company (NYSE: KMI), today filed a certificate application under Section 7(c) of the Natural Gas Act with the Federal Energy Regulatory Commission (FERC) for its proposed Northeast Energy Direct Project (NED).

“The NED Project is a transformative project for the northeast United States,” said Kinder Morgan East Region Natural Gas Pipelines President Kimberly S. Watson. “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.”

The approximately $5 billion NED Project will expand TGP’s existing, extensive pipeline system in Pennsylvania, New York and New England, connecting low-cost natural gas supplies from northern Pennsylvania to New York and New England markets.

On July 16, 2015, KMI announced that its board of directors authorized TGP to proceed with the NED Project Market Path component 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.

Market Need

“Adding the NED Project capacity to transport incremental natural gas supplies will ease natural gas capacity constraints and stands to provide significant benefits to energy consumers in the region in the form of lower natural gas and electricity prices in coming years,” Watson said.

Watson added, “In order to meet demand during the past two winters, 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 finds that the 2013-14 ‘Polar Vortex’ winter resulted in both record high and exceptionally 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 2013-14, the additional pipeline capacity would have eliminated gas and electric price spikes on 86 days during the 2013-14 winter and reduced wholesale electricity expenditures by New England’s business and residents by $3.7 billion,” said Watson.

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,” she said. “The NED Project is the solution.”

Project Facilities

TGP has been providing New York and New England homes, businesses, industry and electric generators with natural gas for over 60 years. With the proposed NED Project, TGP will continue to help both regions meet their natural gas demand now and in the future.

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 consists of approximately 133 miles of 30-inch 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, L.P. at Wright, New York; and approximately 41 miles of 36-inch 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 consists of approximately 188 miles of 30-inch 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. Northeast Expansion, LLC is a joint venture between Kinder Morgan Operating Limited Partnership A, Liberty Utilities (Pipeline & Transmission) Corp., and UIL Holdings Corporation. TGP will construct the Market Path component facilities on behalf of the Northeast Expansion, LLC.

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 LDCs and other market participants for firm transportation service on the Market Path component facilities for 552,262 Dth/d day of the total Market Path component capacity. The Massachusetts Department of Public Utilities and New Hampshire Public Utilities Commission recently approved TGP’s precedent agreements with the LDCs in these states.

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 total of 751,650 Dth/d of firm transportation capacity.

Taken all together, these precedent agreements demonstrate the strong market demand for the NED Project pipeline capacity.

TGP is confident it will secure additional contractual commitments as a result of the initiatives underway with five of the six states in New England to facilitate the ability of electric distribution companies to contract for pipeline capacity and recover the costs in their rates. TGP is in ongoing negotiations with other additional potential project shippers and, as additional precedent agreements are executed, TGP will supplement information for the FERC record.

Source: Tennessee Gas Pipeline Company
Date: Nov 20, 2015