Tallgrass Proposes a Pipeline from Permian to Rockies Express

The Rockies Express Pipeline (REX) has been transformative. Originally built as a west-to-east pipeline, its main job was to give Rockies natural gas a way to reach premium markets in the Midwest and the Northeast. But by the time it was constructed, surging production in the Marcellus and Utica shales had overwhelmed the need for Rockies gas in the East, and REX evolved to become a major outlet for Appalachian gas to the Midcontinent. Now, REX has moved beyond its first two incarnations, and its owner, Tallgrass Energy, has announced plans to build a greenfield pipeline that would connect REX and the markets it serves with the prolific Permian Basin, 900 miles south of the existing mainline. In today’s RBN blog, we’ll discuss REX’s history, where it stands today, and how a new pipeline connection with the Permian might fit into its evolving strategy. 

With the Northeast natural gas market now dominated by physical flows from the Marcellus/Utica, Appalachia producers are targeting the Midwest, the Southeast and—the biggest prize of all—the LNG export projects under development along the Gulf Coast. Getting gas to market, however, requires a top-to-bottom re-plumbing of interstate pipelines originally designed to move gas from the Gulf Coast, not to it. In today’s episode of our series on moving gas out of the Marcellus/Utica we look at plans to add bi-directionality to pipelines within the Midwest and to the Gulf.

After a months-long regulatory delay, two Tallgrass Energy-led natural gas projects have progressed in the past month that will expand takeaway options out of the growing Denver-Julesburg (D-J) production area. Tallgrass in early October began construction on the Cheyenne Connector pipeline and the Rockies Express Pipeline’s Cheyenne Hub Enhancement — aimed at expanding outbound capacity and destination optionality for growing natural gas supplies from the Denver-Julesburg play in the Niobrara Shale, as well as providing a new outlet for Powder River Basin gas. The projects also have secured additional capacity commitments in recent weeks. And in its earnings call last week, Tallgrass said that DCP Midstream, which was already a shipper on Cheyenne Connector, has exercised its option to purchase 50% interest in the project. The influx of gas supply at Cheyenne Hub resulting from these projects will boost eastbound flows on Rockies Express (REX), which is in the midst of recontracting its capacity as existing long-term contracts roll off today. Next, we provide an update on the company’s plans to increase takeaway capacity out of the D-J basin and PRB.