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Rockies Express – The Aorta of the Central U.S.

October 1, 2015 | By Warren Waite

Tallgrass Energy’s Rockies Express Pipeline (REX) is one of today’s most prolific and well positioned natural gas pipelines in the United States. Over the course of the next few years, the role that REX plays in our nation’s natural gas pipeline grid transforms into a major artery that connects all the major market forces and numerous players into what essentially becomes a vital header system. 

In addition to linking supply basins and demand sources as far west as Colorado and as far east as Ohio, REX will also assist in bifurcating gas flows north and south when numerous infrastructure projects from interconnecting pipelines in Illinois, Indiana and Ohio commence service. 

In this issue of Get the Point, we’ll review how REX Zone 3 east-to-west flows are coming along after two months of in-service, the expansion of various Zone 3 interconnect capacities and most importantly walk-through some of the big projects on the drawing board that will directly interconnect with REX.

The history and evolution of REX up until today is an interesting story, but not the focus of today’s blog. In short, REX is a 1,698-mile pipeline originating in northwest Colorado and southern Wyoming stretching east to Clarington, Ohio. The pipeline became fully operational in November 2009 becoming the first pipeline to directly link the Rockies to the Northeast. REX is a joint venture of a subsidiary of Tallgrass Development which owns a 50 percent interest and operates the pipeline. The remaining share of REX is split between Phillips 66 and Sempra U.S. Gas and Power.

The below graphic is a great high level overview and timeline of how REX has evolved over time. The original west to east flow pattern stood in place for over four and half years. Beginning in late June 2014, the 0.6 billion cubic feet per day (Bcf/d) Seneca Lateral was phased in. This was the first time gas moved east to west within a segment of Zone 3.  On August 1, 2015 the 1.2 Bcf/d Zone 3 East-to-West project officially went into service. Since that time, Zone 3 capacity has consisted of 1.8 Bcf/d from the west and 1.8 Bcf/d from the east. Come December 2016, the REX Zone 3 Capacity Enhancement project will add another 0.8 Bcf/d of Appalachia gas supply moving west within Zone 3.

East-to-West Throughput Remains Strong

Officially, east end capacity within REX Zone 3 became fully bi-directional on August 1, with the implementation of the 1.2 Bcf/d REX Zone 3 East to West Project. A little more than one year prior to that, 0.6 Bcf/d of capacity from MarkWest’s Seneca Processing Plant in Noble County, Ohio became the first source of meaningful Zone 3 east-to-west flows. However, soon after other sources of supply began to make their way onto the system. A look at the four sources of Appalachian supply, predominately Utica Shale production, show that eastern receipts in Zone 3 were building rather quickly. Total receipts from the Seneca Plant, Dominion East Ohio Gas and, Eureka Hunter and Rice-Gunslinger surpassed the 1 Bcf/d mark back in June. That total then averaged 1.36 Bcf/d in July, declined slightly to 1.33 Bcf/d in August, and most recently has increased to 1.41 Bcf/d in September. 

Presently, about 0.4 Bcf/d of the 1.8 Bcf/d East-to-West capacity at the Chandlerville compressor stations, located in Muskingum County, Ohio, remains under-utilized. This was recently highlighted in PointLogic Energy’s webinar event last week “Winter 2015/2016:  Savior or Spoiler for U.S. Natural Gas Market.” Together, those same four receipt points discussed above equate to 70% utilization, or 0.6 Bcf/d of open capacity into REX Zone 3.  The details of each are shown in the graphic to the right.  The Seneca Plant is running full, while East Ohio Gas and Eureka Hunter are being utilized at roughly 70 percent of capacity. The supply point with the most room to deliver new volumes is the REX Gunslinger interconnect with Rice Olympus Midstream. The Gunslinger point is the newest of the four, coming online in June 2015. Since Sept. 25, Gunslinger volumes have topped 0.2 Bcf/d. PointLogic expects the remaining capacity at Chandlerville compressor station to fill over the next few months, not necessarily from Rice Gunslinger or the other existing supply points, but from a new addition, Regency’s Utica Ohio River Project. More on that in a minute.

Eastern Ohio Receipt Capacity Grows

Like other natural gas pipelines, the sum of all the receipt point capacities is greater than design throughput and different than the sum of all the delivery point capacities. There are also points on a pipeline that can flow bi-directional. This is to account for variability in supplies and demand on the pipe over time. As shown below, REX Zone 3 receipt capacity is posted just above 2 Bcf/d. However, with the addition of future receipt points that will quickly grow to over 5 Bcf/d.   

PointLogic Energy’s Pipeline Project Tracker is estimating that the Utica Ohio River Project could go into service if not days perhaps weeks from now with an anticipated date of October 1. Recently, there have been a handful of projects that have commenced partial-in-service operations ahead of their official start-up date, such as Texas Eastern’s Uniontown to Gas City Project and their OPEN project. This was at the request of their anchor shippers and approved by FERC.  Given that recent trend, it’s not out of line to suggest that the Ohio River Project may follow suit.

The joint venture between Regency Energy Partners and American Energy-Midstream has been quiet about exact timelines and initial volumes for their up to 2.1 Bcf/d Ohio River Project. The 52-mile pipeline project will act as a trunkline and gathering system for Utica Shale gas production and terminate with interconnects at REX and Texas Eastern (TETCO). 

In 2016, there will be three more additional options for shippers to source supply from. Equitrans is building the 850 MMcf/d Ohio Valley Connector, 35 miles of 30-inch diameter greenfield pipeline to handle Marcellus production that connects to its existing system near Wetzel and Marion County, West Virginia. Gas will then flow northwestwardly to interconnect tie-ins with both REX and TETCO in Monroe County, Ohio. The targeted in-service date is June 2016. It’s not unusual for interconnecting pipelines to complete pipeline modifications on their side of an interconnect prior to the upstream entity. Note that Tallgrass anticipates having the Equitrans interconnect ready about two to three months prior to Equitrans. The Equitrans project will be online six months prior to the 800 MMcf/d REX Zone 3 Capacity Enhancement Project is set to begin.

In coordination with Dominion Transmission’s Lebanon West II Project, REX will open a new interconnect with Dominion near Lebanon, Ohio in November 2016. That same month REX plans to have at the ready a 400 MMcf/d interconnect with Energy Transfer’s newly minted Rover Pipeline. Phase I of that project will bring 2,200 MMcf/d of Marcellus and Utica supplies to Midwest markets in December 2016.

Expanded Delivery Interconnects

Not only did the August 2015 implementation of REX’s Zone 3 East to West Project provide an additional 1.2 Bcf/d of firm westbound transportation it also increased the capacity at several of its interstate pipeline interconnects. This was done to provide anchor shippers the ability to delivery gas as far west within Zone 3 as NGPL-Moultrie, IL which then travels north to the Chicago-Citygates. It also accomplished expanded interconnects for infrastructure projects that are in the works with their interconnect pipeline parties. We’ll discuss those projects a bit later.

The only interconnect thus far to average flows above its prior interconnect capacity is ANR-Shelby. August and September aren’t exactly peak demand months, but once winter demand materializes PointLogic expects the utilization of the expanded interconnects to increase from current levels.

Old and New Players

Just beyond four years from now, all of the 1.8 Bcf/d Zone 1 to Zone 3 west-to-east capacity held by REX’s foundation and anchor shippers will expire, specifically in early November 2019. Exactly how much of that ends up being renewed or contracted by different counterparties remains to be seen. But it’s safe to say the value of that long-haul capacity will have diminished in its ten years of existence. It is likely that REX will maintain a portion of its Zone 1 to Zone 3 west-to-east volumes beyond 2019. The reservation rates of that capacity will most likely be lower than the $1.65/Dekatherm of Firm Transportation Service that it is today.

PointLogic Energy subscribers have access to our database of anchor shipper information that complements our extensive list of over 250 different pipeline projects that span North America. Unlike 2009 when anchor shippers on REX consisted of companies like Sempra Rockies Marketing LLC, Conoco Phillips, Encana Marketing (USA) and others, the recent and future capacity enhancements on REX are subscribed by a different breed of market players such as Antero Resources, Gulfport Energy Corp., American Energy-Utica and EQT Energy LLC. 

The main difference is the newer 20 year contract holders are younger in age, smaller in market cap and tend to have a business that is somewhat less diversified than some of the integrated oil and gas companies that signed on with REX back in 2009. For the anchor shippers of projects that have come online in 2014, 2015 as well as those that will commence contractual service in 2016, the uplift in netback pricing to the wellhead and the optionality provided by delivery points that feed both the Midwest and Gulf Coast markets are very appealing. 

The Coronary Arteries of REX

If production from the Niobrara Shale in the Rockies and the Utica/Marcellus Shale in Appalachian Basin are the heart of supplies, then REX itself is the aorta that feeds natural gas molecules to vital demand centers downstream. To get there, six main interstate pipelines in Zone 3, or coronary arteries if you can excuse the additional categorical analogy, will vessel those gas molecules to Midwest markets north of REX pipeline and South to markets along the Gulf Coast.

All six of those pipelines; Texas Gas Transmission, ANR, Panhandle Eastern (PEPL), Midwestern Gas Transmission (MGT), Trunkline Gas and Natural Gas Pipeline of America (NGPL) already have or will have projects in place to flow gas both north and south from REX. The target market for the pipeline projects that will move gas south of REX is mainly liquefied natural gas demand from the LNG export projects set to commence along the Texas and Louisiana coasts. Some of the anchor shippers on these pipeline projects have direct exposure to some of these LNG export projects. There is also growing industrial and petrochemical demand in the same regional vicinity as the LNG terminals that cheap Marcellus and Utica gas can help serve. 

The map below is a high-level overview of all the pipeline projects that will in one form or another effect interconnect deliveries on REX in Zone 3. The lime green arrows are for projects already in service. The teal blue arrows are for projects that will come online by the end of 2015. Projects that begin in 2016 are in blue while 2017 start-ups are in red. A short summary of each of these projects is chronicled below. Further details of each project are available to our subscribers who can access the PointLogic Energy Project database. 

Texas Gas Transmission

There are two projects in the works from Boardwalk Pipeline Partners owned Texas Gas Transmission. Each of these consists of modifications of some existing compressor stations and a construction of a new one to help facilitate north to south gas flows. In both cases Texas Gas retains the existing capability to flow gas south to north. The 758 MMcf/d Ohio-Louisiana Access Project is targeted for an in-service date in June 2016. Then by April 2017 the Northern Supply Access Project will provide 584 MMcf/d of firm north to south transportation service from Ohio to Louisiana.


TransCanada’s ANR Pipeline has been busy developing new projects that tap into the east-to-west oriented projects from neighboring pipelines in addition to finding ways to increase deliverability on its Eastern Mainline north of REX into Michigan and south into Louisiana. The Southeast Mainline System Reversal Phase 1 project went into service in November 2014 with a capacity of 1,250 MMcf/d. Roughly 600 MMcf/d was secured by firm commitments to flow south.  The second phase of the 2.0 Bcf/d reversal project is targeted for December 2015 when the remaining 750 MMcf/d goes into service. On September 10, 2015 the ANR/REX interconnect at Shelbyville, Indiana increased by 0.7 Bcf/d to total 1.2 Bcf/d. 

North of the REX-Shelby interconnect ANR has already reversed the Lebanon Lateral and in November will add the ability to receive gas from Texas Eastern with the Glen Karn 2015 Project plus the ability to attract more volumes via a second phase to their Lebanon Lateral expansion. Then there is the Midwest Market Expansion Project (MAPP) that could add up to 3.4 Bcf/d of receipt capacity in Zone 3 of ANR’s Southeastern Mainline in the fourth quarter of 2018.

Panhandle Eastern and Trunkline Gas Transmission

Energy Transfer Partners subsidiary Panhandle Eastern Pipeline Company and Trunkline Gas Transmission each have projects in place to support backhaul capability from Energy Transfer’s new-build Rover Pipeline. The goal is to take gas from the Defiance Hub (ANR-PEPL-Rover interconnects) and move that east to west along PEPL’s Market Zone and then from the PEPL-Trunkline interconnect at Bourbon, Illinois and flow north to south along Trunkline in Zones 1B and 1A. These two Energy Transfer owned projects are targeted for a November 2016 start date. One month later Rover Pipeline is scheduled for in-service. The Panhandle Backhaul Project and the Trunkline Backhaul Project each have a capacity of 750 MMcf/d. The change in flow dynamics for these REX Zone 3 interconnects could possibly incentivize additional flows south of REX to reach into growing demand regions along the Gulf Coast.

Midwestern Gas Transmission

From its REX/Scotland interconnect in Edgar County, Illinois MGT will expand its northbound deliverability by 125 MMcf/d. MGT will build a new compressor station at Herscher, Illinois to effectuate the added capacity. The fully subscribed MGT-Northbound Expansion Project will go into service December 1, 2015. 

Natural Gas Pipeline of America

Kinder Morgan owned and operated NGPL has two projects on the horizon, each in a two part phase, that will increase its deliverability from the recently expanded REX interconnect. The first one to go into service is the Gulf Coast Market Expansion Project Phase I in July 2016. The 500 MMcf/d project will provide incremental firm service from its interconnect with REX in Moultrie County, Illinois southbound to NGPL’s TexOk, South Texas and Louisiana delivery zones. In September it was announced that Cheniere Energy agreed to 385 MMcf/d of that capacity. Cheniere will use the capacity on NGPL as a feedstock for their Corpus Christi, Texas LNG export facility that is expected to go into service in 2018. Phase II of the Gulf Coast Market Expansion Project is targeted for a November 2016 start date and will add another 250 MMcf/d of southbound capacity. 

The second NGPL project is the Chicago Market Expansion Project Phase 1 which will add 238 MMcf/d when it starts up in November 2016. Phase II comes one year later when an incremental 200 MMcf/d becomes available to flow north from the REX-Moultrie, Illinois interconnect to the Chicago market. 

Prairie State Pipeline

In late 2014 Prairie State Pipeline was announced for development and operation by Tallgrass Development, LP along with ownership participation by AGL Resources, who is the parent company of Nicor Gas--a large utility near Chicago that serves 2.2 million customers. As announced, Prairie State Pipeline would run 140 miles north of REX to numerous interconnects with local distribution companies around Chicagoland, and  will also provide direct access to utility owned storage as well as interconnects to interstate pipelines. The capacity is expected to be 1.2 Bcf/d to 1.5 Bcf/d subject to final commitments and is targeted for a November 2017 in-service date. Receipt wise, Prairie State will draw supplies from interconnects in and around Douglas County, Illinois. Those options include interconnects with REX, PEPL and Trunkline. 

Results from the open season held last year haven’t been publically released as of yet. In late August it was announced that Southern Company, one of the largest electric utilities in the country will acquire fellow Atlanta based, AGL Resources for $12 billion in cash. The combined companies will create the second largest utility in the U.S. by customer base.

Final Thoughts

Going back to the analogy made at the beginning of this blog posting, REX (if you don’t think of it as such already) will become a major header system, or aorta, that will bring production from numerous resources to its network of interconnecting pipelines, or coronary arteries, that will deliver vital natural gas from low cost resources to growing demand centers within the Midwest and along the Gulf Coast. REX will not only link the Rockies, Midcontinent and Northeast, it will play an important role in facilitating gas flows north into the Midwest and south to LNG export facilities and the industrial, petrochemical complex along the Texas and Louisiana coast. 

In a future edition of Get the Point we’ll take a dive into what is happening in the Rockies given all the headwinds facing production and gas flows. Thank you for taking the time to learn more about the dramatic changes in infrastructure related to REX. The current product suite offered by PointLogic Energy provides the tools necessary to stay on top of what is happening in the natural gas markets. Over the next several months we will be rolling out a variety of new products and enhancements to better serve your needs. To learn more about our Pipeline Module, includng the Pipeline Project Tracker, I invite you to sign up for a free trial. And to learn more about the soon-to-be released supply and consumption modules, contact us at info@pointlogicenergy.com.

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