This month, TransCanada subsidiary Columbia Pipeline Group will complete two large projects, the new Mountaineer XPress pipeline, which runs almost 200 miles from northern West Virginia south to connect with Columbia Gas’ (TCO) SM Line, and the Gulf XPress project, which expands capacity on the existing Columbia Gulf pipeline, taking gas from Leach, Kentucky south towards Mississippi and Louisiana. Together, these projects provide a welcome outlet for Appalachian production, which has dealt with infrastructure outlet bottlenecking issues for the last four years. With the in-services of the final phase of Rover and NEXUS earlier this fall, overall production levels finally have a bit of breathing room when it comes to leaving the southwestern Pennsylvania/northern West Virginia/southeastern Ohio producing area. However, these projects targeted outlets to the north of production, while Mountaineer and Gulf XPress will provide a highway south.
When will these projects start up?
We currently expect the new build greenfield section of Mountaineer XPress (MXP) to achieve mechanical completion in late December 2018, which is in line with TransCanada’s projection stated during their Q3 earnings call. The rate of construction steadily increased recently, and our late November reconnaissance flight provided welcome clarity into what sections of the pipeline could be most at risk for delay, though we believe completion in December is most likely.
We expect Gulf XPress (GXP) will start up at the very end of December 2018, potentially earlier than MXP. These projects are certificated separately, meaning GXP could easily come online and flow gas sourced from TCO before MXP adds additional supply. We expect no delays to this project from FERC’s increased attention to environmental restoration.
I heard MXP already started, is that true?
Well, yes and no. There was a partial service observed in October for the Elk River Compressor Station, which was built on TCO partially under the MXP umbrella and partially under another project’s, WB XPress. This compressor station was not expected to add any new capacity associated with MXP at that point in time but is currently supporting volumes flowing on the associated WB XPress project. Volumes through this station are expected to increase when the rest of MXP enters service.
What are the big risk factors to your in-service dates?
The first risk is weather. So far, it’s been a rough year for pipe construction, from a wet spring to fall hurricanes and early cold snaps. We currently expect that large ice or snow storms in December could halt work long enough to delay completion into late December or as late as January.
The second biggest risk is FERC. The Federal Energy Regulatory Commission (FERC)’s recent focus on the completed percentage of environmental restoration efforts by pipelines finishing up construction has proven tricky to track and predict. In the past, we have seen FERC approve pipelines ahead of restoration efforts reaching any particular threshold, but in the last year or so, FERC has shown reluctance to approve flow of gas through a completed project until 60-70% of the remediation is completed along the pipe’s Right of Way.
As FERC filings and approvals are published we will send out alerts and analysis to clients of our Infrastructure Intelligence product.
Are you still expecting partial service?
Aside from the Elk River Compressor station, we are not expecting partial service. We could see some sort of partial service on MXP or GXP from only a few of the compressors coming online initially—like what we saw with the NEXUS and Rover projects—but we do not have granular insight into completion status of these compressors.
The greenfield pipeline of MXP itself is either in-service or not – there’s no part of it that would be useful without the rest of the pipe ready to complete the path south.
Where does the gas come from – incremental production?
We do not have any jumps in regional production associated with MXP coming online, unlike projects that have come online in the last few years. However, we are expecting more reroutes from Majorsville, Sherwood and Braxton area gas in northern West Virginia.
Where does the gas come from – physically?
MXP is physically located in western West Virginia (WV) and sources gas from northern WV at an interconnect with Leach XPress, which was built last year and came online in January 2018. The MXP receipt location is just north of where Leach Xpress exploded earlier this year in an unrelated incident. MXP has a design throughput capacity of 2.7 Bcf/d. Gas is also expected to route directly from the Sherwood Processing Plant in Doddridge County, WV, a nearby interconnect with TCO, and potentially a couple of new interconnects with local gathering systems.
Where does the gas flow to?
Gas received onto/transported by MXP will mainly see transport into the TCO Pool. Some shippers on the project have a slightly different setup, in that they also have capacity on GXP out of the region. GXP will take gas on Columbia Gulf from the interconnect with TCO in Leach, Kentucky down into Mississippi, specifically targeting the ML Pool and Gulf Coast markets, which have premium pricing to the still-low Appalachian hubs.
It’s worth noting here that there is a significant mismatch between the supply to TCO Pool represented by MXP (+2.7 Bcf/d) and the takeaway from TCO Pool represented by GXP (.86 Bcf/d). This could have severe implications to prices at the TCO Pooling point unless there is additional outlet for the gas that we have been unable to identify.