Waiting on the World to Change, Part 4 - Could ACP, MVP Delays Bring Back Northeast Gas Takeaway Constraints?

With recent project completions, Northeast takeaway constraints have eased, and regional supply prices have strengthened. But now the slate of planned pipeline expansions is dwindling. Between late-2015 and the end of 2018, midstreamers will have completed 23 takeaway projects out of Appalachia, totaling nearly 14.5 Bcf/d of capacity. That leaves just a handful of projects with little more than 6 Bcf/d of capacity to come, most of them facing stiff environmental opposition, regulatory turmoil and higher costs. Yet, as Appalachian gas production continues to grow, these projects will be critical to keeping the takeaway constraints and depressing supply pricing from returning, at least for a little longer. More than half of the remaining capacity would come from two competing projects — Dominion Energy’s Atlantic Coast Pipeline (ACP) and EQM Midstream Partners’ Mountain Valley Pipeline (MVP) — both greenfield efforts tied to growing gas-fired power generation demand along the Mid- and South-Atlantic seaboard and both embattled by a barrage of legal challenges. In today’s blog, we provide an update on the Atlantic Coast and Mountain Valley projects, including the latest status and timing.

This blog is the latest in a series updating our view of Northeast takeaway projects. Appalachian gas production and the pipeline expansions facilitating its access to growing demand markets are key to understanding how the U.S. gas supply and demand balance will shape up this winter and beyond. As we detailed in our recent Drill Down Report, the capacity that’s been brought online this year so far — first from the phased in-service of Energy Transfer’s Rover Pipeline this summer and more recently from Williams/Transco’s Atlantic Sunrise (see Part 1 of this series) and Enbridge/DTE Energy’s NEXUS pipelines (see Part 2) — has finally allowed Northeast takeaway constraints to ease and catapulted Marcellus/Utica basis (local outright prices minus the Henry Hub prices) to the strongest levels we’ve seen for this time of year since 2013. In the past couple of weeks, the Federal Energy Regulatory Commission (FERC) approved the final pieces of the Rover Pipeline, namely the Sherwood and Columbia Gas Transmission (CGT) laterals. And, before the year is up, we should see the in-service of the next major Northeast-to-Gulf Coast flow reversal projects: the Mountaineer Xpress and Gulf Xpress expansions of TransCanada’s legacy Columbia Gas Transmission (TCO) and Columbia Gulf Transmission (CGT) systems (as detailed in Part 3). Now, we dive into the details and prospects of the ACP and MVP, starting with their geographic descriptions.

Despite the significant number of new gas-fired power plants being built along or near these projects, (see Back Down South and Slow Burn), the path to completion for both pipelines has been anything but straightforward. It hasn’t helped that they have similar routes and target some of the same general market areas in the Virginias, as shown on the map in Figure 1 below.