New $1B Marcellus Gas Pipeline Coming from NE PA to MD

Three companies are joining forces to spend $1 billion to build a new Marcellus natural gas pipeline that runs from northern Pennsylvania to Maryland. Most major pipelines head in the other direction, trying to tap into northeastern markets like New York and Boston. But Inergy, UGI and WGL, the three partners, have a different take. They want to send gas in the other direction—to the Mid-Atlantic region—and along the way service markets including Philadelphia, Baltimore and Washington, D.C.

Dubbed the Commonwealth Pipeline, this new 200 mile, 30-inch pipeline will start in Lycoming County, PA where Inergy is currently building a gathering pipeline to connect Marcellus wells in Bradford and Sullivan counties, and from there go south through central and eastern PA, eventually connecting to WGL’s gas distribution system near Rockville, MD. The new pipeline will connect with other major pipelines along its route allowing gas to move bi-directionally.

From the Inergy press release:

Inergy Midstream, L.P., a subsidiary of Inergy, L.P., yesterday announced plans to jointly market and develop a new interstate natural gas pipeline known as the Commonwealth Pipeline with affiliates of UGI Corporation and WGL Holdings, Inc. The proposed 200 mile, 30-inch pipeline is expected to transport at least 800,000 dekatherms per day of natural gas when it is placed into service; and affiliates of UGI and WGL are expected to execute precedent agreements to become anchor shippers on the new pipeline. The parties anticipate placing the new pipeline into service in 2015.

The Commonwealth Pipeline will extend from the southern terminus of Inergy Midstream’s MARC I pipeline in Lycoming County, Pennsylvania, through UGI’s utility service areas in central and eastern Pennsylvania to a point of interconnection with WGL’s gas distribution system near Rockville, Maryland. The pipeline will connect attractive demand centers in the Mid-Atlantic region, including Washington D.C., Baltimore, and Philadelphia to abundant and reliable supplies of natural gas production from across Pennsylvania while providing a more cost-effective transportation path versus traditional routes.

“We are pleased to be working with UGI and WGL to develop this significant infrastructure project, which will provide direct access to new demand markets for gas producers,” said Bill Moler, Senior Vice President and COO of Inergy Midstream. “Gas production in the Northern tier of Pennsylvania has been limited by the lack of take-away capacity in existing interstate pipelines, most of which currently serves markets in the Northeast. The Commonwealth Pipeline is expected to provide much-needed transportation capacity to desirable new and growing demand markets in the Mid-Atlantic.”

John Sherman, President and CEO of Inergy Midstream, added, “This project is a natural extension of Inergy Midstream’s storage and transportation platform in the Northeast. We are committed to developing the critical infrastructure that natural gas customers desire. For our investors, this project adds to our plans for high quality, fee-based cash flows that underpin the stability and growth of our cash earnings.”

The pipeline is expected to cross and interconnect with a number of interstate pipelines along its route, providing customers greater supply diversity while providing producers direct access to expanding markets that are currently served only through legacy interstate pipelines. Upon completion of the MARC I and the Commonwealth Pipeline, shippers will have the ability to move volumes bi-directionally to or from multiple pipelines (including Dominion Transmission, Tennessee Gas Pipeline, Millennium Pipeline, Transco, and TETCO) across an interconnected platform of assets to demand markets in the Northeast and Mid-Atlantic.

The sponsors expect to own equal equity interests in the project company formed to own the Commonwealth Pipeline. The plans are for Inergy Midstream to construct and to operate the pipeline, which is expected to cost approximately $1.0 billion and be funded equally among the sponsors.

A non-binding open season will be announced in March 2012 for shippers interested in acquiring capacity on the proposed Commonwealth Pipeline.*

*Inergy Midstream (Mar 1, 2012) – Inergy Midstream Announces Plan to Jointly Develop a New Interstate Natural Gas Pipeline with Affiliates of UGI and WGL