Express Yourself - Tallgrass/Rockies Express's Recontracting Efforts for Rockies Gas Flows

Tallgrass Energy’s Rockies Express Pipeline (REX) has been through a lot in its 10-plus years of operation. Since its first eastbound-only segments started moving natural gas out of the Rockies in 2008, flows on the pipeline have evolved due to market events, primarily the onset of the Shale Revolution, which has resulted in a surge of gas supplies in the Eastern U.S. and increasing gas-on-gas competition across North America. Rising to the challenge, REX has undergone a number of transformations to adapt to the shifting gas flow patterns and price relationships, including reversing flows on the eastern zone of the pipe to move gas west from Ohio. In 2019, REX was again put to the test, this time on the western end of the pipe, where the bulk of its legacy long-term contracts for eastbound flows out of the Rockies expired, with the last of them rolling off on November 11, 2019. Some of that has since been recontracted, and the in-service of the REX Cheyenne Hub Enhancement and Cheyenne Connector projects could further shore up REX mainline flows. Today, we begin a short series providing an update on REX’s eastbound gas flows and contract changes.

You could say REX is the Madonna of gas pipelines. The Queen of Pop’s four-decades-long (and still going) career has been attributed to her habit of constantly reinventing herself. Similarly, REX’s long-term success has depended on its ability to morph, particularly given the rapid-fire changes that have buffeted the gas market over the past decade, all driven by the dramatic effect the Shale Revolution has had on the geographic distribution — and sheer volume — of gas supply across the Lower 48. The large-diameter, long-haul pipeline is now a robust bidirectional cross-country system that behaves like a massive header system for interregional flows. But it didn’t start out that way.

As we’ve recounted many times in the RBN blogosphere (see Get Back to Where You Once Belonged, Walking Tall and Big Deal! for a few of those instances), REX began as a much-needed outlet for surplus Rockies gas supply, initially only extending east to delivery points in the Midcontinent and terminating at the Panhandle Eastern Pipe Line (PEPL) interconnect in northeastern Missouri (blue dot on Figure 1 map). But by November 2009, the easternmost section was completed, allowing REX to flow as much as 1.8 Bcf/d all the way east to Clarington, OH (lavender dot to the right), for further delivery into the Northeast’s premium consuming markets along the Atlantic seaboard. This eastern section of REX — or Zone 3 (aqua line) — added more than 15 interconnects with other interstate pipelines running generally perpendicular to REX and feeding Midwestern and Eastern markets plus a number of local utilities in Illinois, Indiana and Ohio. This all made sense at a time when Rockies natural gas producers were looking to sell into the Eastern U.S., and when the Northeast region — the biggest heating demand region in the U.S., then and now — had little local supply of its own to help balance its consumption. As a result, Rockies producers quickly filled REX to near its eastbound capacity of about 1.8 Bcf/d (black line) by April 2010, and sustained that level for over a year (yellow oval in lower-left graph in Figure 1). But that plateau didn’t hold up for long.