Crestwood to Build New Marcellus Pipeline in NE WV

Houston-based Crestwood Midstream yesterday announced they will construct a new 16” inch Marcellus gathering pipeline that will run 42 miles through Preston, Taylor and Barbour counties in northeast West Virginia, connecting to Columbia Gas Transmission’s WB Pipeline in Randolph County, WV. By connecting to the WB Pipeline the new gathering pipeline will have access to the Washington, DC and Baltimore markets.

The new pipeline will be completed by this time next year and already has a long term “anchor” contract with Mountaineer Keystone, a Pittsburgh-based drilling company that will commence their horizontal drilling program in the area in the middle of 2012.

From the press release:

Crestwood Midstream Partners LP announced today the signing of a memorandum of understanding with Mountaineer Keystone LLC (“MK”), headquartered in Pittsburgh, Pennsylvania, to construct  a  42 mile 16" natural gas  gathering  system (the “Tygart Valley Pipeline”) to serve MK’s Marcellus Shale development  program in Northeast West Virginia. The Tygart Valley Pipeline (“TVP”) is expected to be completed by the fourth quarter 2012 and  will interconnect with Columbia Gas Transmission’s WB Pipeline in Randolph County, West Virginia.  The TVP will provide MK and other area producers with access to the growing natural gas markets in the Washington DC and Baltimore areas. Crestwood estimates the TVP project, as currently planned, will cost approximately $70 million. Additionally, Crestwood has announced that it has hired Brian S. Blount as Vice President of Crestwood’s newly formed Marcellus Commercial Region, effective December 1, 2011.

“This project is an excellent entry point  for Crestwood  into the Marcellus Shale  which is expected to become the industry’s largest shale producing region  over the next few years,” stated Robert G. Phillips, President and Chief Executive Officer of Crestwood’s general partner. “Crestwood is pleased to  announce a great long-term organic growth project in the region, the addition of Brian Blount, who has vast experience in the area, to our development team, the opening of a commercial office for the region and the expansion of  our diversified portfolio of shale play midstream assets to include the fast growing Marcellus Shale.”

The Tygart Valley Pipeline project will be anchored by a long term contract with MK, a First Reserve  portfolio company. First Reserve, a premier private  investment  firm  in the energy industry, also manages the fund which owns Crestwood Holdings LLC, the majority owner of Crestwood’s general partner. MK will commence its  horizontal drilling program in Barbour, Preston and Taylor Counties, West Virginia in mid-2012. The TVP, as currently designed, will have total capacity of approximately 200 million cubic feet per day (“MMcf/d”) which can be expanded to approximately 300 MMcf/d with compression. MK  expects to  reserve firm capacity of 115 MMcf/d under a long-term, fixed-fee  gathering agreement. Crestwood is currently marketing the remaining firm capacity in the project to area producers that have been accumulating Marcellus Shale leases but have been slow to commence drilling and development due to a lack of pipeline infrastructure in the area.

“We look forward to working with MK to develop this project,  as well as the  additional upstream gathering and other midstream services needed in the area. The MK team has a long history of success and is a very experienced Appalachian producer. Additionally, we think the TVP project will be well received by other producers in the area that have expressed the need for infrastructure to support their planned Marcellus development programs. Finally, the project also  demonstrates the benefit of having First Reserve, as the  sponsor of Crestwood’s general partner, to bring additional value to the Partnership through its  broad  portfolio of energy investments,” continued Phillips.

Brian Blount, a former Business Manager with Columbia Gas Transmission, has fifteen years of commercial, engineering and operations experience in the Appalachian Basin and will report to Joel D. Moxley, Senior Vice President and Chief Operating Officer of Crestwood.  “We are excited to have Brian join the Crestwood team as we expand into the Marcellus Shale. Brian brings great knowledge and expertise about the Marcellus region, having worked in the region over the past decade.  Brian has developed great relationships, understands the dynamics of the area and will be instrumental in Crestwood’s development of the TVP,” stated Moxley.*

*Crestwood Midstream Press Release (Dec 13, 2011) – Crestwood Announces Agreement to Construct Natural Gas Pipeline System in the Marcellus Shale